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 prefer a tariff above quota because tariff ensures a flow of income for the government and quota doesn\'t.

For example, if the government has raised a tariff of 10% over the imports of computer parts. This will increase some income of the government whenever new computer parts are imported in the US. But, with quota government may give away the license to import on the first come first serve basis or auction the license. any similar method will limit the government income the similar amount. So, the government prefers tariffs.