Question

Assignment Score: 82.5% Resources Ex Give Up? Hint Check Answer Question 12 of 12 > Which of the choices describes how the effects of import tariffs and import quotas are different? Import tariffs create deadweight loss, whereas import quotas do not create deadweight loss. The domestic cost of an import tariff is larger than the domestic cost of a comparable import quota. Some foreign producers receive some of the benefits generated by an import quota. Quotas do not affect the equilibrium price, whereas tariffs do not affect the equilibrium quantity. O

Answer 1

Quotas do not affect the equilibrium price, whereas tariffs do not affect the equilibrium quantity.The import tariff decreases the import quality and increases the price of the good. The import restricting effect and consumption effect is same for quotas and tariff. So, the dead weight loss from them is the same from quotas and tariff However, tariff enables the government to increase their revenue from the imports while import quotas precludes such revenue .Thus, the cost tariff is lower than the import quotas imposed.The main difference is that quotas restrict quantity while tariff works through prices. Thus, quota is a quantitative limit through imports.If an import quota is imposed then price would rise because the total supply (domestic output plus im­ports) equals total demand at that price. As a result of this quota, domestic production, con­sumption, and imports would be the same as those of the tariffs.Thus, the output effect, con­sumption effect and import restrictive effect of tariff and quotas are exactly the same. The only difference is the area of revenue.