The Difference Between the Effect of an Import Quota When

question 161

Multiple Choice

The difference between the effect of an import quota when quota rights are given away and the effect of a tariff is that

• A)only the tariff results in a higher domestic price
• B)only the quota decreases the amount of goods imported
• C)the decrease in producer surplus is smaller with the quota
• D)under a quota, part of the decrease in consumer surplus is redistributed to foreign producers; under a tariff, it is redistributed to the domestic government
• E)under a tariff, part of the decrease in consumer surplus is redistributed to foreign producers; under a quota, it is redistributed to the domestic government

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Definitions:

Cost-Benefit Analysis

An economic school of jurisprudence in which all costs and benefits of a law are given monetary values. Those laws with the highest ratios of benefits to costs are then preferable to those with lower ratios.

Manufacturing Plant

A facility where goods are produced on a large scale using machinery, often involving assembly lines or automated processes.

Infrastructure

The fundamental facilities and systems serving a country, city, or area, including transportation, communication, utilities, and public services.

Precedent

A legal decision or case that establishes a principle or rule which courts may follow in future cases with similar issues.