Asked by Deanne Pawhay on Jul 16, 2024
Verified
A government can impose an import quota or an equivalent tariff that achieves the same impact on trade. What is the key difference in the welfare outcomes of these two policy options?
A) The domestic quantity supplied is larger under the tariff policy.
B) The domestic price is higher under the tariff policy.
C) The domestic price is lower under the tariff policy.
D) The government captures some of the profits from foreign suppliers through the tariff revenue.
Import Quota
A restriction set by a government on the quantity of a certain good that can be imported into the country.
Welfare Outcomes
The effects of policies or economic conditions on the well-being and quality of life of individuals or populations.
Equivalent Tariff
A tariff level that would give the same protective effect to the domestic producers as a given non-tariff barrier does.
- Evaluate the welfare outcomes of import quotas versus tariffs.
Verified Answer
JM
jasha moncurJul 21, 2024
Final Answer :
D
Explanation :
The key difference between an import quota and an equivalent tariff is that with a tariff, the government collects revenue on the imported goods. In contrast, an import quota restricts the quantity of goods that can be imported without directly generating revenue for the government.
Learning Objectives
- Evaluate the welfare outcomes of import quotas versus tariffs.