Compared with a tariff, welfare losses will _______ when voluntary export restraints are used to reduce imports.
A) decrease
B) not change
C) increase
D) first increase, then decrease

Question

Quizplus · Accepted Answer

Voluntary export restraints typically lead to higher welfare losses compared to tariffs because they not only reduce the quantity of imports (like tariffs) but also lead to higher prices and can result in inefficient allocation of resources. Additionally, the gains from the higher prices often go to the foreign exporters rather than the importing country's government.

Compared with a Tariff, Welfare Losses Will _______ When Voluntary