Asked by Jhollo Redondo on May 31, 2024
Verified
The basic difference in the economic effects of a tariff compared with a quota is that a
A) quota reduces domestic consumption of the product, but a tariff does not.
B) tariff allows imports to increase if demand increases, whereas a quota does not.
C) tariff raises product prices, but a quota does not.
D) quota raises product prices, but a tariff does not.
Economic Effects
Refers to the consequences of economic policies, activities, or changes on a society, industry, or economy.
Tariff
A tax imposed by a government on goods and services imported from other countries, used to restrict imports by increasing the price of goods and services purchased from abroad.
Quota
A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specified time frame.
- Discern and organize different barriers to trade and understand their effects.
- Assess the effects of imposing tariffs and quotas on indigenous supply, demand levels, and government fiscal receipts.
Verified Answer
CS
Chanon SmitthakornMay 31, 2024
Final Answer :
B
Explanation :
A tariff is a tax on imports, which can allow for the quantity of imports to increase if there is an increase in demand, as suppliers may still find it profitable to export to the country imposing the tariff. On the other hand, a quota sets a physical limit on the quantity of goods that can be imported, regardless of changes in demand, thus not allowing imports to increase beyond the set limit. Both tariffs and quotas can raise product prices, but their mechanisms for affecting trade volumes differ.
Learning Objectives
- Discern and organize different barriers to trade and understand their effects.
- Assess the effects of imposing tariffs and quotas on indigenous supply, demand levels, and government fiscal receipts.