Question

If you were an import-competing producer in a growing market, which trade instrument would you prefer...

If you were an import-competing producer in a growing market, which trade instrument would you prefer - a tariff, an import quota, or a subsidy? Why?

Homework Answers

Answer #1

If i were an import competing producer in a growing market i would import quota because import quota limits the amount of goods and services which are being imported and as a result quantity available to customers decrease and due to this domestic price increases. So now when the domestic sales as well as price is higher without rise in imports, the growth in demand also becomes higher. So the quota actually restrict quantity supplied which causes adjustment of price in contrast to tariff which induces adjustment of quantity by fixing higher price kf domestic goods

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