What Is the Major Difference Between a Tariff and a Quota

question 63

Multiple Choice

What is the major difference between a tariff and a quota that has equivalent effects upon domestic production?

• A) A quota does not lead to an increase in domestic prices, while a tariff does.
• B) The government collects tariff revenue with a tariff; other domestic groups (e.g., domestic producers, importers) may collect the equivalent of this tariff revenue with a quota.
• C) The government collects area c with a tariff; exporters collect area c with a quota, thus leading to further deadweight losses for the quota-imposing country.
• D) The government collects area c with a tariff; importers collect area c with a quota, offsetting consumption deadweight losses and leading to lower deadweight losses for the quota-imposing country.

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