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ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536

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BuyFindarrow_forward

ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536
Chapter 3, Problem 4.14P
Textbook Problem
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(International Trade) Distinguish between a tariff and a quota. Who benefits from and who is harmed by such restrictions on imports?

To determine

The difference between a tariff and a quota and determine the agents that benefit or get harmed from such restrictions on imports

Concept Introduction:

Tariff: A tariff is a tax imposed by the government on the imported goods and services to make it less competitive than the goods produced in the domestic markets.

Quota: A restriction on the quantity of goods and services imposed by the government that can be imported into the domestic markets is termed as a quota.

Explanation of Solution

Tariffs are taxes that affect the prices of the imported goods and services, while quota is a restriction on the quantity that can be imported in the domestic country. Tariff do not directly affect the quantity of the goods imported, only increases the price of imported goods. Quota on the other hand affects the quantity of the imported goods and incase the government sells the import quota, then affects the prices of the goods, however, this effect is indirect...

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