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Tariffs, Quotas and Trade

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Please help answer the following questions. Include references in the solution.

What is the difference between a tariff and a quota? What is the impact of a trade surplus? What is the impact of a trade deficit? How does politics affect international trade?

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What is the difference between a tariff and a quota? What is the impact of a trade surplus? What is the impact of a trade deficit? How does politics affect international trade?

Answer:

Revenue effect of import quota differs from the revenue impact of an import tariff. As far as the tariff is concerned, tariffs could lower the domestic relative price of the importable good and this effect is known as the Metzler paradox, whereas it opposite the import quotas always increase the domestic relative price of the importable good.

Similarly, in a growing market imposition of import tariff is a less restrictive trade barrier than an equivalent trade quota. Trade ...

Solution Summary

This solution answers questions regarding tariffs, quotas and trade. References are included.

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