Explanation:

Inverted duty structure is a situation where import duty on finished goods is low compared to the import duty on raw materials that are used in the production of such finished goods. For example, suppose the tariff (import tax) on the import of tires is 10% and the tariff on the imports of natural rubber which is used in the production of tires is 20%; this is a case of inverted duty structure.

Statement 1: When the import duty on raw materials is high, it will be more difficult to produce the concerned  good domestically at a competitive price. Several industries depend on imported raw materials and components. High tax on the raw materials compels them to raise price. The disadvantage of the inverted duty  structure increases with the increased use of imported raw materials. An inverted duty structure discourages domestic value addition.

Statement 2: On the other hand, foreign finished goods will be coming at a reduced price because of low tax advantage. In conclusion, manufactured goods by the domestic industry becomes uncompetitive against imported finished goods. In such a case, even foreign investors would not be interested in setting up a firm for production in the country.

Statement 3: It will be just the opposite.