The Difference Between the Effects of an Import Quota and a Tariff

question 26

Multiple Choice

The difference between the effects of an import quota and 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:

Other Comprehensive Income

Revenues, expenses, gains, and losses that are not included in net income, but affect shareholders' equity.

Unrealized Loss

A decline in worth due to the possession of an asset that has depreciated in value, yet remains unsold.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, are subtracted from total revenue.

Dividends Paid

The portion of a company's earnings distributed to shareholders as a reward for their investment.