Which of the following statements regarding the effects of a tariff, quota, and

Question

Which of the following statements regarding the effects of a tariff, quota, and subsidy are correct? Check ail that apply A subsidy involves smaller sacrifices in national welfare than occur under an equivalent tariff or quota. The direct cost of the subsidy is borne by foreign producers. A subsidy yields the same result for domestic producers as does on equivalent tariff or quota, but at a higher cost. Tariffs and quotas distort choices for domestic consumers and cause less efficient home production.

Explanation / Answer

a and d.

a subsidy does not distort choices like a tariff or quota which either changes the price of the good or places a cap on what he can buy. and hence there is a smaller sacrifice of national welafre, however it cannot be concluded that it is entirely born by the foreign producers, there is an impact at the national level which is lower than alternate options.

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