/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q6. Why is a quota more detrimental ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 20: Q6. (page 430)

Why is a quota more detrimental to an economy than a tariff that results in the same level of imports as the quota? What is the net outcome of either tariffs or quota for the world economy?

Short Answer

Expert verified

The government loses tax revenue under quota than a tariff that results in the same level of imports as the quota.

The net outcome of either tariffs or quotas for the world economy is that it loses efficiency.

Step by step solution

01

Step 1. Tariff and quota

A tariff is a tax that the domestic government imposes on the goods and services imported. Quota is a restriction put on the number of imported goods. The quota is more detrimental than the tariff when the level of imports is the same as the quota. The government incurs a loss in earning, because tariffs are a source of government revenue.

02

Step 2. Net outcome of either tariff or quota

The tariff or quota results in imposing costs for domestic consumers, and it gives profit to domestic producers and the government from tariff revenue. The cost to the domestic consumer is seen from the change in prices of the product. Different studies have concluded that the cost to the consumer is more than the gains to the domestic producers and government; thus, generous cost or loss in efficiency results from trade protection.

There is a loss in efficiency to the entire world if every economy loses efficiency.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Draw a domestic supply-and-demand diagram for a product in which the United States does not have a comparative advantage. What impact do foreign imports have on domestic price and quantity? On your diagram show a protective tariff that eliminates approximately one-half of the assumed imports. What are the price-quantity effects of this tariff on (a) domestic consumers, (b) domestic producers, and (c) foreign exporters? How would the effects of a quota that creates the same amount of imports differ?

The accompanying hypothetical production possibilities tables are for New Zealand and Spain. Each country can produce apples and plums. Plot the production possibilities data for each of the two countries separately. Referring to your graphs, answer the following:

New Zealand鈥檚 Production Possibilities Table (Millions of Bushels)


Production Alternatives

Product

A

B

C

D

Apples

0

20

40

60

Plums

15

10

5

0


Spain鈥檚 Production Possibilities Table (Millions of Bushels)


Production Alternatives

Product

R

S

T

U

Apples

0

20

40

60

Plums

60

40

20

0

  1. What is each country鈥檚 cost ratio of producing plums and apples?

  2. Which nation should specialize in which product?

  3. Show the trading possibilities lines for each nation if the actual terms of trade are 1 plum for 2 apples. (Plot these lines on your graph.)

  4. Suppose the optimum product mixes before specialization and trade were alternative B in New Zealand and alternative S in Spain. What would be the gains from specialization and trade?

Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. Assuming constant costs, in which product should each nation specialize? Explain why. What are the limits of the terms of trade between these two countries?

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

The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U.


China Production Alternatives

Product

A

B

C

D

E

F

Apparel (in thousands)

30

24

18

12

6

0

Chemicals (in tons)

0

6

12

18

24

30


U.S. Production Alternatives

Product

R

S

T

U

V

W

Apparel (in thousands)

10

8

6

4

2

0

Chemicals (in tons)

0

4

8

12

16

20

  1. Are comparative-cost conditions such that the two areas should specialize? If so, what product should each produce?

  2. What is the total gain in apparel and chemical output that would result from such specialization?

  3. What are the limits of the terms of trade? Suppose that the actual terms of trade are 1 unit of apparel for 1陆 units of chemicals and that 4 units of apparel are exchanged for 6 units of chemicals. What are the gains from specialization and trade for each nation?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.