Consider the following statements with reference to tariffs and quotas 1 While tariffs directly impa...........

Economic Affairs Foreign Trade - Trends and Policy

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Consider the following statements with reference to tariffs and quotas:

1. While tariffs directly impact the value of imports, quotas aim to curb the volume of imports.

2. Both tariffs and quotas restrict imports and protect the domestic firm.

Which of the above mentioned statements is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Tariffs are a tax on imported goods. They make imported goods more expensive and discourage their
use. Quotas specify the quantity of goods which can be imported. The effect of tariffs and quotas is that
they restrict imports and therefore protect the domestic firms from foreign competition