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Chapter 20: Q13. (page 431)

American apparel makers complain to Congress about competition from China. Congress decides to impose either a tariff or a quota on apparel imports from China. Which policy would Chinese apparel manufacturers prefer?

  1. Tariff

  2. Quota

Short Answer

Expert verified

The correct option is: b) Quota

Step by step solution

01

Step 1. Explanation

A tariff is a tax on imported products, whereas a quota restricts the number of quantities imported. The imposition of tariff increases the government revenue and safeguard the domestic producer; the government may use the tariff revenue for the well-being of the society. The imposition of quota increases the product's price but does not add any revenue to the domestic government. Hence, it is preferred by the exporting producer as it increases their revenue. Thus, China will prefer the policy of quota.

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Most popular questions from this chapter

Refer to Figure 3.6, page 57. Assume that the graph depicts the U.S. domestic market for corn. How many bushels of corn, if any, will the United States export or import at a world price of \(1, \)2, \(3, \)4, and \(5? Use this information to construct the U.S. export supply curve and import demand curve for corn. Suppose that the only other corn-producing nation is France, where the domestic price is \)4. Which country will export corn; which county will import it?

How might protective tariffs reduce both the imports and the exports of the nation that levies tariffs? How might import competition lead to quality improvements and cost reductions by U.S. firms?

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Assume that the comparative-cost ratios of two products鈥攂aby formula and tuna fish鈥攁re as follows in the nations of Canswicki and Tunata:

Canswicki: 1 can baby formula 鈮� 2 cans tuna fish

Tunata: 1 can baby formula 鈮� 4 cans tuna fish

In what product should each nation specialize? Which of the following terms of trade would be acceptable to both nations: (a) 1 can baby formula 鈮� 2 1/2 cans tuna fish; (b) 1 can baby formula 鈮� 1 can tuna fish; (c) 1 can baby formula 鈮� 5 cans tuna fish?

Suppose that the current international price of wheat is \(6 per bushel and that the United States is currently exporting 30 million bushels per year. If the United States suddenly became a closed economy with respect to wheat, would the domestic price of wheat in the United States end up higher or lower than \)6?

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