It is always the case that:
A)the deadweight loss will be lower with a quota system than a tariff system.
B)there will be a deadweight loss from imposing tariffs on imports, even though the government may have a need for the revenue from the tariffs.
C)free trade will lead to a deadweight loss.
D)the deadweight loss will be lower with a tariff system than a quota system.

Question

Quizplus · Accepted Answer

It is always true that there will be a deadweight loss from imposing tariffs on imports, even if the government needs the revenue. This is because tariffs increase the price of imported goods, reducing consumption and overall welfare in the economy. The deadweight loss represents the reduction in total welfare that occurs as a result of the tariff. Choices A, C, and D are incorrect because they make blanket statements that are not always true. The deadweight loss can vary depending on the specific circumstances of the tariff or quota system in place. Imposing tariffs on imports creates a deadweight loss by reducing the overall efficiency of international trade. This results in higher prices for domestic consumers and a reduction in the overall quantity of goods traded. While the government may need revenue from tariffs, the deadweight loss is still present. The other choices either incorrectly state the relationship between deadweight loss and tariff/quota systems or make an untrue statement about free trade.

It Is Always the Case That