Suppose a Government Is Considering Imposing Either a Tariff or a Quota

question 5

Multiple Choice

Suppose a government is considering imposing either a tariff or a quota on imported grain, and either policy will result in exactly 750 tons of grain being imported. How do these policies differ?

• A)The price of grain under the tariff will be higher than the price under the quota.
• B)The price of grain under the quota will be higher than the price under the tariff.
• C)Domestic production will be higher with the quota than with the tariff.
• D)The quota will generate revenue for the firms that hold import licenses, while the tariff will generate revenue for the government.

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