Assume the United States is considering either a tariff or a quota to

Assume the United States is considering either a tariff or a quota to protect motorcycles.

For each of the following groups, list whether they should prefer either the tariff or the quota, or be indifferent between the two: importer of motorcycles, taxpayers, foreign producer of motorcycles.

ANSWER

The importer of motorcycles will prefer the quota because it generates extra profit for him since the importer can buy at the world price and sell it at the artificially high domestic price. The taxpayers prefer the tariff, because at least it brings in revenue to the U.S. Treasury which could be used to reduce taxes elsewhere. Foreign producers of motorcycles will be indifferent between the two because the effect on them will be the same under both a tariff and quota.