Would consumers benefit more from a tariff or a quota on imp

Would consumers benefit more from a tariff or a quota on imports? Provide one (1) supporting fact to support your response.

Consider the following weekly production possibilities of gloves and hats in Panama and Russia:

----------|--------Russia------------|------------Panama

Gloves |---------20-----------------|-------------180----

Hats |-------------80----------------|----------------90----

What is each country\'s opportunity cost of producing gloves and hats?
If the countries could, should they trade? Provide one (1) supporting fact to support your position.

Solution

a) a quantitative analysis leads to ambiguous results while analysing the welfare loss between quota and tariffs.However, tariff can be preferred over quota because it leads to revenue generation for the government. Also quotas can lead to administrative corruption and smuggling, thus the social cost in case of quota is higher.

b) Opportunity cost for gloves:

Russia = 4 (80/20), Panama = 2 (180/90)

Opportunity cost for hats:

Russia = 1/4 (20/80), Panama = 1/2 (90/180)

Because there is a gap between opportunity cost there is an option to trade. Since opportunity cost for gloves is lower in Russia, it should produce gloves. And opportunity cost for hats is lower in Panama thus it should produce hats.