A key difference between tariffs and import quotas is that
A)consumers are hurt with import quotas but not with tariffs.
B)consumers are hurt with tariffs but not with import quotas.
C)the government receives revenue with a tariff,but the importer makes a profit with an import quota.
D)the government receives revenue with an import quota,but the importer makes a profit with a tariff.
E)producer surplus increases with a tariff and decreases with an import quota.

Question

Quizplus · Accepted Answer

Tariffs are taxes on imported goods, which are paid to the government, while import quotas are limits on the quantity of a good that can be imported, which typically result in increased profits for the domestic producers who are able to sell the limited quantity at a higher price. Consumers can be hurt by both tariffs and import quotas, as they typically result in higher prices and less variety of goods available. However, in the case of tariffs, the revenue generated goes to the government, while with import quotas, the benefit goes to the domestic producers who are able to charge higher prices. Therefore, choice C is correct. Choice E is incorrect because producer surplus decreases with a tariff due to the increased cost of production.

A Key Difference Between Tariffs and Import Quotas Is That