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state whether the proposition is true or false and explain the logic of your answer. In...

state whether the proposition is true or false and explain the logic of your answer.

  1. In terms of economic welfare in the importing country, the least-costly barrier to imports is a tariff, a worse policy is a quota, and an even worse policy is a voluntary export restraint (VER).
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Answer) The above statement is true. In terms of welfare of importing nation:

  1. Tariff has relatively least distorting effect as the tariff revenue could be used for other welfare measures.
  2. Quota has a distorting effect because the import quantity is limited. In case of import quota no revenue can be earned.
  3. Voluntary export restraint is the worse as no import can be made by the importing nation. It leads to a loss for exporting nation and the importing nation can't import any quantity leading to a welfare loss.
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