3 A government is considering a quota and a tariff both of w

3) A government is considering a quota and a tariff, both of which wll reduce imports by the same amount. Why might the government prefer one of these policies to the other?

Solution

The government will look for its revenue earning possibilities while using any of the policies. Tariff ensure a constant flow of revenue for the government whereas the quotas don\'t. For example, if the government has levied a tariff on fruits from Brazil. whenever a consumer imports anything from Brazil government will earn some revenue but in the case of quota, the government revenue is limited to the amount which they sold the import licenses for. Hence, a government will go for a tariff.