Discuss the differences between a tariff and a quota. Explain why quotas are considered to be a greater threat to competition than tariffs.
What will be an ideal response?
A tariff is a tax on imported goods (and a source of revenue for the government) while a quota is a limit on the quantity of a good that may be imported during some time period. Quotas are considered to be a greater threat to competition than tariffs because quotas eliminate the possibility of additional imports over the quota limit even if consumers are willing to pay higher prices for these goods. Tariffs permit the possibility of additional imports, although at higher prices.
You might also like to view...
The supply curve illustrates that firms:
A. decrease the quantity supplied of a good when input prices rise. B. increase the quantity supplied of a good when its price rises. C. decrease the supply of a good when its price rises. D. increase the supply of a good when its price rises.
Rich country to poor country migration is relatively uncommon
Indicate whether the statement is true or false
The ceteris paribus assumption means
A) favors are returned in kind. B) this is the proof of the matter. C) from many, one. D) other things are equal.
When does a subsidy that benefits consumers result in a more efficient allocation of a resource?
A. when the equilibrium price of the good is one that consumers don't like B. when the good being produced or consumed generates a positive externality C. when the good being produced or consumed is not scarce D. when the good being produced or consumed generates a negative externality