Economic theory in general, and trade theory in particular are replete with equivalencies
For example, it is argued that for any specific tariff one can find an equivalent ad valorem tariff; and that for any quota one can calculate a tariff equivalent. Discuss conditions or situations under which a specific and an ad valorem tariff are not equivalent. Discuss conditions or situations when a tariff and a quota are not equivalent.
E.g., during a period of price inflation, an ad valorem tariff would become increasingly more effective. The government does not receive any of the quota revenues, unless the import licenses are sold or auctioned.
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If the Herfindahl-Hirschman index (HHI) among the firms in the long distance telecommunications market were equal to 1755, when would the Federal Trade Commission probably challenge a proposed merger between any two of the firms?
A) It would challenge if the HHI would increase by more than 50 points. B) It would challenge if the HHI would increase by more than 100 points. C) It would challenge no matter what happened to the HHI because the market has so few firms. D) It would not challenge because the HHI is less than 1800.
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the GDP Price Index and current international transactionsin the context of the Three-Sector-Model?
a. The GDP Price Index rises, and current international transactionsbecomes more negative (or less positive). b. The GDP Price Index and current international transactionsremain the same. c. The GDP Price Index falls, and current international transactionsremains the same. d. The GDP Price Index falls, and current international transactionsrises. e. There is not enough information to determine what happens to these two macroeconomic variables.