Assignment:
1. Describe both quotas and tariffs. How do they impact domestic prices and deadweight loss?
How does an import quota differ from an equivalent tariff?
What is best for a nation as a whole: a tariff, a quota, or free trade? Explain your answer.
2. Give an example of a positive and a negative externality.
Would a Coasean solution resolve the economic efficiency of the externalities you cited? Why or why not?
3. The Coase theorem suggests that efficient solutions to externalities can be arrived at through bargaining. Under what circumstances does this fail to produce a solution?