Which statement BEST reflects the difference between tariffs and quotas?
A) Tariffs raise prices on exports, while quotas set limits on imports.
B) Tariffs raise prices on imports, while quotas set limits on exports.
C) Tariffs raise prices on exports, while quotas set limits on exports.
D) Tariffs raise prices on imports, while quotas set limits on imports.
My answer is D correct?
Answer is D
Right
Thanks! Can you check the ones below please?
To determine the correct answer, let's understand the difference between tariffs and quotas.
Tariffs and quotas are both trade barriers that governments use to restrict the flow of goods and services across borders. However, they differ in how they affect prices and the volume of trade.
Tariffs are taxes imposed on imported goods. When a country applies a tariff, it increases the price of imported goods. This makes imported products more expensive for consumers and can protect domestic industries by making their products relatively cheaper. Tariffs primarily affect imports, not exports.
On the other hand, quotas are quantitative restrictions on imports or exports. Quotas set limits on the quantity of goods that can be imported or exported. When a country implements a quota, it restricts the volume of trade by limiting the amount of goods that can be imported or exported. Quotas can have the effect of raising the price of goods, but this is an indirect consequence, not the primary objective.
Based on this explanation, the statement that BEST reflects the difference between tariffs and quotas is:
B) Tariffs raise prices on imports, while quotas set limits on exports.