For a country that is considering the adoption of either a tariff or an import quota on a particular good,an important difference is that
A)an import quota has no effect on consumer surplus,while a tariff decreases consumer surplus.
B)an import quota has no effect on producer surplus,while a tariff decreases producer surplus.
C)a tariff raises total surplus,while an import quota does not.
D)a tariff raises revenue for that country's government,while an import quota does not.

Question

Quizplus · Accepted Answer

A tariff raises revenue for the government of the importing country, while an import quota does not generate revenue. Both a tariff and an import quota reduce imports and protect domestic producers, but a tariff increases the price of the imported good, lowering consumer surplus, while an import quota restricts the quantity of imports, causing an increase in prices and possibly benefiting domestic producers, but with no effect on consumer surplus. Therefore, D is the correct answer as it highlights the main difference in terms of revenue generation between a tariff and an import quota.

For a Country That Is Considering the Adoption of Either