APFIVE Consumer Welfare Effects of Quotas and Tariffs
What could be a likely long-term effect on consumer welfare if the government sets quotas instead of tariffs on imported goods that compete with domestic products?
A
By guaranteeing minimum sales volumes quotas provide producers with incentives thus enhancing future product diversity increasing consumer welfare.
B
Quotas ensure better quality control compared with tariffs creating greater consumer satisfaction regarding product safety.
C
Quotas might restrict variety thereby reducing consumer choice and potentially decreasing consumer surplus more than tariffs would.
D
The quota system increases domestic competition leading directly to lower prices for consumers.
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