Question - Suppose the U. S. government reduces the allowable imports of foreign cars by one half, through the use of quotas on imports.
a. Analyze the effects of this on the markets for American produced cars, steel and petroleum. Who would stand to gain, and who would lose from this law?
b. Explain why the same reduction in imports could be achieved by a tariff on foreign cars. Who would benefit and who would lose if the reduction were accomplished by a tariff rather than by quotas?