Which of the following is not a description of what a tariff can achieve in a perfectly competitive market?
A)A tariff can achieve many of the same goals as an import quota.
B)A tariff can create less domestic deadweight loss than a quota if the tariff revenues are redistributed domestically.
C)A tariff can create greater government revenues than a quota.
D)A tariff creates enough government revenue to completely offset the impact of deadweight loss, thereby increasing total surplus.

Question

Quizplus · Accepted Answer

A tariff cannot completely offset the impact of deadweight loss, so choice D is incorrect. Tariffs can achieve the other three goals listed, including creating government revenues and affecting domestic deadweight loss similarly to quotas. The statement "a tariff creates enough government revenue to completely offset the impact of deadweight loss, thereby increasing total surplus" is incorrect because tariffs, like all forms of trade restrictions, create deadweight loss in the market. While tariffs can generate government revenue, they do not completely offset the negative effects on consumer surplus and producer surplus.

Which of the Following Is Not a Description of What