Which of the following is TRUE?

Question

Quizplus · Accepted Answer

Tariffs on imports generate government revenue as long as the domestic price is larger than the world price plus the tariff. This is because the tariff increases the domestic price of the imported good and the revenue generated from the tariff is equal to the amount of the tariff multiplied by the quantity of imports. However, if the domestic price is already higher than the world price plus the tariff, then the tariff does not generate government revenue as there would be no imports. The statement in option A is incorrect as an import quota generates surplus for the domestic producers, but not government revenue. Option D is incorrect as government revenue is generated from tariffs when the conditions mentioned in option B are met.

Which of the Following Is TRUE