A Major Difference Between a Tariff and a Quota Is

question 1

Multiple Choice

A major difference between a tariff and a quota is that a tariff

• A) will reduce imports, but a quota generally will not.
• B) can easily be rescinded, but a quota cannot.
• C) will reduce the ability of foreigners to obtain the purchasing power to buy a nation's export goods, but a quota will not affect the foreign demand for the nation's exports.
• D) typically generates tax revenue, while a quota does not.

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Definitions:

Short Run

A period in which at least one input (e.g., capital) is fixed, limiting the capacity for output adjustment.

Long-Run Cost Function

An economic model that describes how production costs change over time as all inputs can be varied by the producer.

Marginal Cost Function

A mathematical relationship describing how the cost of producing one additional unit of output varies as production scale changes.

Optimal Output

The level of production that maximizes a firm's profit, where marginal revenue equals marginal cost.