Which measure causes the least damage economically and why?
Import quotas vs. Tariffs
Import tariffs cause the least damage economically. Importers under a quota system are placed in a monopoly like situation and can gain high profits. When compared with tariffs, under quotas the same restriction produces higher price rise in the home country. There is a theory of tariff-quota equivalence which assumes perfect competition. The theory says that if perfect competition prevails in the market a tariff and import quota are equivalent in the sense that ...
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