What Is the Main Difference Between a Tariff and a Quota

question 10

Multiple Choice

What is the main difference between a tariff and a quota based on the effects on consumer surplus, producer surplus, and government revenues?

• A) The loss of consumer surplus from tariffs is always larger.
• B) The loss of consumer surplus from quotas is always larger.
• C) The gain in producer surplus from tariffs is always larger.
• D) The amount of government revenues collected from a tariff is always larger.

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Definitions:

Determinants of Demand

Factors that influence the quantity of a product or service that consumers are willing and able to buy at a given price.

Sum of Demand Curves

The aggregate demand curve that is obtained by horizontally adding individual demand curves in a market.

Snob Effect

A phenomenon where the demand for a certain good increases as the price increases because the good is perceived as being more desirable, exclusive, or prestigious.

Luxury Goods

High-quality, expensive items that are not essential but are desired for their status symbol and prestige.