Tariffs and quotas tend to be similar in their domestic welfare effects
A)if quota licenses are given to foreigners.
B)if quota licenses are auctioned.
C)if quota licenses are given to domestic firms.
D)Both B and C.

Question

Quizplus · Accepted Answer

Tariffs and quotas are similar in their domestic welfare effects if quota licenses are auctioned or given to domestic firms. In both cases, the domestic producers receive the benefit of reduced competition and higher prices. When quota licenses are auctioned, the government earns revenue, which can be used for public goods and services, but when they are given to domestic firms, the benefits flow only to a particular group of producers, and there is no revenue for the government. Therefore, both B and C are the best choices.

Tariffs and Quotas Tend to Be Similar in Their Domestic