Over time,quotas usually lead to larger deadweight losses than tariffs.

Question

Quizplus · Accepted Answer

Quotas restrict the quantity of imports allowed into a country, which leads to higher prices for domestic consumers and reduces the welfare of both consumers and producers. Tariffs, on the other hand, introduce a tax on imports that raises the price of the imported good and reduces the quantity demanded, which can also lead to deadweight losses. However, tariffs do not necessarily restrict the quantity of imports allowed into a country, which can reduce the magnitude of deadweight losses. As a result, quotas tend to create larger deadweight losses than tariffs over time.

Over Time,quotas Usually Lead to Larger Deadweight Losses Than Tariffs