One main difference between tariffs and quotas is that
A. ?consumers can import any amount of the imports that have tariffs placed on them, but they are restricted to a set maximum amount they can import for goods subject to quot
B. ?tariffs benefit domestic producers but quotas do not.
C. ?tariffs raise the price of imported products but quotas do not.
D. ?All of the above.
The Correct Answer and Explanation is:
Correct Answer: A. Consumers can import any amount of the imports that have tariffs placed on them, but they are restricted to a set maximum amount they can import for goods subject to quotas.
Explanation:
Tariffs and quotas are both tools used in trade policy to restrict imports and protect domestic industries, but they operate in fundamentally different ways.
Tariffs are taxes imposed on imported goods. When a country applies a tariff to a specific product, it increases the cost of importing that product. This makes imported goods more expensive compared to domestically produced goods, which helps domestic producers compete. However, there is no limit on the quantity of goods that can be imported—importers can bring in as much as they want, provided they are willing to pay the higher price due to the tariff.
Quotas, on the other hand, are quantitative restrictions that limit the number of units or the total value of a specific good that can be imported over a set time period. Once the quota is met, no further imports of that good are allowed until the quota resets. This method restricts the physical availability of foreign goods in the market, which can have a more direct impact on supply and pricing.
Answer A correctly identifies the primary distinction: tariffs allow unlimited import quantities (subject to added cost), whereas quotas strictly limit the quantity of imports.
Answer B is incorrect because both tariffs and quotas can benefit domestic producers by reducing foreign competition.
Answer C is also incorrect because quotas can raise prices too, often more sharply than tariffs, due to artificial scarcity.
Answer D is incorrect because not all the above statements are true.
Thus, Answer A best captures the key functional difference between tariffs and quotas.
