Consider a choice between a quota and a tariff on Japanese autos, each of which reduces Japanese auto imports to the U.S. by the same amount. How would the following individuals view the choice?

Question

Quizplus · Accepted Answer

The CEO of Ford Motor in Detroit would likely prefer a quota. This is because a quota would limit the number of Japanese autos entering the U.S. market, reducing competition for Ford. A tariff, while it would increase the price of Japanese autos, might not necessarily reduce their market share if consumers are willing to pay the higher price.
b. The CEO of Toyota in Osaka would likely prefer a tariff. While a tariff would increase the cost of Toyota autos in the U.S., it would still allow Toyota to sell as many autos as it can at the higher price. A quota, on the other hand, would limit the number of autos Toyota could sell in the U.S., regardless of demand.
c. A member of the United Auto Workers (UAW) would likely prefer a quota. A quota would reduce the number of Japanese autos in the U.S. market, potentially increasing demand for domestically produced autos and potentially leading to more jobs or job security for UAW members.
d. An American auto consumer would likely prefer a tariff. While a tariff would increase the price of Japanese autos, it would still allow for a choice between domestic and foreign autos. A quota would limit the availability of Japanese autos, reducing consumer choice. However, if the tariff is too high, it could significantly increase the price of Japanese autos, which would not be beneficial for the consumer.

Consider a Choice Between a Quota and a Tariff on Japanese