If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then

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Quizplus · Accepted Answer

Both a tariff and an import quota can lead to equivalent increases in the domestic price of steel, affecting the quantity produced and consumed similarly. However, the key difference lies in how they impact income distribution. A tariff generates revenue for the government (from the duties imposed on imported goods), while a quota typically transfers income from consumers to the foreign and domestic producers who receive the import licenses, without generating revenue for the government.

If a Tariff and an Import Quota Lead to Equivalent