Question

What is the main economic difference between a tariff and a quota?

Multiple choice question.
A. A tariff generates revenue for the domestic government.
B. A quota reduces imports more sharply than a tariff.
C. A tariff will cause higher prices than a quota.
D. A tariff will cause lower prices than a quota.

Answer 1

A tariff generates revenue for the domestic government, while a quota reduces imports more sharply than a tariff.

Step-by-step explanation:

The main economic difference between a tariff and a quota is that a tariff generates revenue for the domestic government, while a quota reduces imports more sharply than a tariff. A tariff is a tax imposed on imported goods, which increases the price paid by consumers and allows the government to collect revenue. On the other hand, a quota sets a limit on the quantity of imports, which can result in a more significant reduction in imports compared to a tariff.