If politicians decide to proceed with protection, why might economists prefer tariffs to quotas? Explain at least three reasons
What will be an ideal response?
• The greater welfare loss from quotas since quota permits are not generally sold
• The inability of quotas to respond to increases in domestic demand except through higher prices and increased producer surplus. With tariffs, the volume of imports simply adjusts to changing market conditions and market prices are less volatile.
• Tariffs are more transparent and probably less costly to administer.
• Tariffs favor the most efficient foreign producers. They don't arbitrarily limit entry or discourage innovation by foreign firms (but they do for domestic firms, meaning we are creating a situation that rewards foreigners for being innovative and efficient, something not in the long run best interests of domestic firms).
You might also like to view...
To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
Use the following data to answer the next question. The disposable income (DI) and consumption (C) schedules are for a private, closed economy (an economy with no government and no international trade). All figures are in billions of dollars.Disposable IncomeConsumption$10,000$12,00018,00018,00026,00024,00034,00030,00042,00036,00050,00042,000If disposable income is $42,000, then saving is
A. $4,000. B. $2,000. C. $6,000. D. $0.
HMOs create the incentive to _____
a. minimize health care expenditures b. avoid important but expensive procedures c. enroll individuals with serious illnesses d. a and b
Positive analysis can be described as
A) the study of whether people respond to positive incentives. B) the study of whether people respond to negative incentives. C) a value-free approach to inquiry. D) a study that is not tested empirically.