CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Assume the United States government is considering imposing a trade barrier on the importation of foreign-made cars to protect the American automobile industry and its workers from foreign competition. Suppose the government is considering imposing either a tariff or a quota on foreign cars. If it is going to do one or the other, which would be most beneficial from the government's standpoint? Why?
Correct Answer: From the government's perspective, imposing a tariff is preferred because a tariff will generate revenues to the government whereas a quota will not.

User Contributed Comments 1

User Comment
khalifa92 the space between the deadweight loss will be in favor for the importer country in case of quota
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