If politicians decide to proceed with protection, why might economists prefer tariffs to quotas? Explain at least three reasons
What will be an ideal response?
• The greater welfare loss from quotas since quota permits are not generally sold
• The inability of quotas to respond to increases in domestic demand except through higher prices and increased producer surplus. With tariffs, the volume of imports simply adjusts to changing market conditions and market prices are less volatile.
• Tariffs are more transparent and probably less costly to administer.
• Tariffs favor the most efficient foreign producers. They don't arbitrarily limit entry or discourage innovation by foreign firms (but they do for domestic firms, meaning we are creating a situation that rewards foreigners for being innovative and efficient, something not in the long run best interests of domestic firms).
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In the above table, for Mary the opportunity cost of producing a dress is ________ and the opportunity cost for Mark of producing a dress is ________
A) 1 1/2 jackets; 2 1/2 jackets B) 1 jacket; 1 jacket C) 1 dress; 1 dress D) 1 1/2 jackets; 2/3 of a jacket E) 1 1/4 jackets; 1/2 of a jacket
A competitive firm hires labour until the marginal product of labour equals the:
A. real wage. B. rental price of capital. C. price of output. D. capital/labour ratio.