Suppose the US government is considering placing a tariff or quota on imported c

Question

Suppose the US government is considering placing a tariff or quota on imported cars. Which of the following statements is N regarding tariffs and quotas? O A Tariffs and quotas both increase the price of foreign cars in the US B US car producers only benefit from the tariffs because it allows them to charge more for the US cars O C A tariffis a tax on imported cars and a quota is a limit on the number of cars that may be imported O D Domestic car producers would like to see either a tariff or quota on imported cars

Explanation / Answer

OPTION B is wrong

US producers will get benefit in both the cases of tariffs and quotas because this will reduce the availability of goods in the domestic market thereby provides a chance to producers to increase their prices.

Both tariffs and import quotas will reduce the quantity of imports, So this will increase domestic price of the good, and thus create pressure on domestic consumers, increase profitability of domestic producers. Imposing of Tariffs will raise revenues of government (import quotas may not impact revenues of government).

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