Exhibit 30-2
-The government is considering imposing either a tariff that will restrict export supply according to the data in Exhibit 30-2 or a quota that limits imports to 8 units. Which of the following is true?

Question

Exhibit 30-2 
-The government is considering imposing either a tariff that will restrict export supply according to the data in Exhibit 30-2 or a quota that limits imports to 8 units. Which of the following is true?

Quizplus · Accepted Answer

Producers will prefer the quota because it will limit the amount of imports coming into the country, giving domestic producers more market power and potentially leading to higher prices and profits. Consumers, on the other hand, may prefer the tariff because it will allow them to continue purchasing the product at a lower price, albeit with potentially fewer options. The government may collect more revenue with the quota if it auctions off the limited import licenses, but this cannot be determined from the information given. The equilibrium price will likely be higher with the quota, not lower, as the restriction on imports will reduce supply and potentially lead to higher prices. Imports will be lower with the quota, not higher, as the maximum amount of imports allowed is limited to 8 units.

Exhibit 30-2 -The Government Is Considering Imposing Either a Tariff That Will