Which Policy for Restricting Trade Would Be Most Attractive to a Country

question 235

Multiple Choice

Which policy for restricting trade would be most attractive to a country that is imposing a trade restriction in an effort to raise as much government revenue as possible to cover government expenses?

• A) a quota that reduces imports by 100,000 units for a product with $100 price tag
• B) a quota that reduces imports by 50,000 units for a product with a $150 price tag
• C) a 10% ad valorem tariff on a product with a $100 price tag that reduces imports from 300,000 to 200,000 units
• D) a $8 specific tariff on a product with a $100 price tag that reduces imports from 350,000 to 220,000 units

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Definitions:

Equilibrium Quantity

The quantity of goods or services at which demand equals supply, and there is no tendency for the market price to change.

Equilibrium Price

The price at which the quantity of a good demanded equals the quantity supplied, leading to a stable market condition.

Demand

The amount of a product or service that buyers are ready and capable of buying at different price points.

Public Utilities

Companies that provide essential services such as water, electricity, and telecommunications to the public, often under government regulation.