During periods of growing domestic demand, an import quota ?
Correct answer: B. Is more restrictive on a country's imports than a tariff
- A. is less restrictive on a country's imports than a tariff
- B. Is more restrictive on a country's imports than a tariff
- C. has the same restrictive effect on a country's imports as a tariff
- D. will always generate increased tax revenue for the government
Explanation
A quota fixes the physical quantity of imports, so it becomes more restrictive as domestic demand grows and pushes up the domestic price. A tariff normally allows imports to expand when demand rises, making the quota relatively tighter.
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