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Consider a small country imposing a tariff of $2/unit in imported corn (Policy A). Suppose the country was importing 300 units and this policy resulted
Consider a small country imposing a tariff of $2/unit in imported corn (Policy A). Suppose the country was importing 300 units and this policy resulted in a decline of imports to 250 units.
Suppose the government adjusts the policy so that there is a tariff of $2/unit is imposed up to a quota of 100 units and then the tariff rate doubles to $4/unit for any imports above that level (Policy C). Can you think of reasons why Policy C may be preferable to a quota at 100 units?
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