Asked by Leyla Jackson on Jul 25, 2024
Verified
Refer to Figure 9.5.2 above. Now suppose an import quota of 3000 trucks is imposed. If the government wanted to cut off all international trade without changing the quota, it could allow the quota amount of 3000 trucks in at no tariff and then charge a tariff on all imports above the quota amount. What tariff would accomplish the goal?
A) $0
B) $5,000
C) $7,500
D) $10,000
E) $20,000
Import Quota
A regulatory measure that sets a physical limit on the quantity of goods that can be imported into a country over a specified period of time.
Tariff
A tax imposed by a government on goods and services imported from other countries, used to control trade.
International Trade
The exchange of goods and services across national borders, driven by the principle of comparative advantage.
- Assess the impact on welfare resulting from the implementation of import quotas compared to tariffs.
- Predict the market responses to government-imposed taxes and quotas, including shifts in supply and demand curves.
Verified Answer
WT
Warren TubalJul 29, 2024
Final Answer :
B
Explanation :
To cut off all international trade without changing the quota, the government would need to set a tariff that equals the difference between the domestic price and the world price plus the existing tariff. Since the quota allows for 3000 trucks, setting a tariff that raises the price of any additional imports to match the domestic price would effectively stop further imports. Without specific numbers from Figure 9.5.2, the correct answer is based on the principle that the tariff needed would be the one that makes importing any more trucks beyond the quota financially unfeasible, which is option B, $5,000, based on the given choices.
Learning Objectives
- Assess the impact on welfare resulting from the implementation of import quotas compared to tariffs.
- Predict the market responses to government-imposed taxes and quotas, including shifts in supply and demand curves.