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

Question

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Both a tariff and an import quota increase the domestic price of steel and decrease the quantity demanded. As a result, they have identical impacts on how much is produced and consumed. However, a quota leads to inefficiencies in production because it reduces competition and allows domestic producers to charge higher prices, whereas a tariff does not directly affect production efficiency.

If a Tariff and an Import Quota Lead to Equivalent