Question

Which of the choices describes how the effects of import tariffs and import quotas are different? The domestic cost of an import tariff is larger than the domestic cost of a comparable import quota. Import tariffs create deadweight loss, whereas import quotas do not create deadweight loss. Some foreign producers receive some of the benefits generated by an import quota. Quotas do not affect the equilibrium price, whereas tariffs do not affect the equilibrium quantity.

Answer 1

Answer:

Quotas do not affect the equilibrium price, whereas tariffs do not affect the equilibrium quantity.

Explanation:

The import tariff decreases the import quality from AD to CB and increases the price of the good from P to P*. The import restricting effect and consumption effect is same for quotas and tariff. So, the deadweight loss from  them is the same from quotas and tariff (HIJ and GEF).

Please observe the image attached.

However, tariff enables the government to increase their revenue from the imports while import quotas precludes such revenue (GEHI). Thus, the cost tariff is lower than the import quotas imposed.