Lily wants to build a business. She has very little capital. She does, however, have a partner with which she could run a busine
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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.
