ECONOMICS
FOREIGN CURRENCY MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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restrict imports
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increase the price of imported goods
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benefit domestic consumers of imported goods
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hurt domestic producers of goods facing import competition
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generate additional revenue for the domestic government
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Detailed explanation-1: -Tariffs are taxes that governments place on imported goods of a specific type. Quotas are import limits that prevent more than a set amount of a specific good from being imported into a country.
Detailed explanation-2: -A quota limits the quantity of a good that can be imported into a country. A tariff is a tax placed on an import.
Detailed explanation-3: -Tariffs and quotas affect the economy by limiting unfair trade. When a government limits imports, it minimizes unfair trade practices like pricing imported products below the cost at which they were produced. Quotas also minimize dumping or price discrimination between the import and export market.
Detailed explanation-4: -There is greater loss of government revenue and consumer surplus with the quota. To the extent that quota rents are shared between the foreign firms and the local monopolist, these two producers benefit from the quota at the expense of the importing economy.