Question

Show graphically that for any tariff, there is an equivalent quota that would give the same result. What would be the difference, then, between the two types of trade barriers?

Short answer

The graph showing tariff and quota is,

The difference between the two trade barriers is,

Step-by-step solution

Step 1. Meaning of Trade.

Trade refers to the exchange of goods and services between the people of different countries.

The two most common trade barriers are tariffs and quotas.

Step 2. The graph shows tariffs and equivalent quotas.

The graph that shows the tariffs and their equivalent quotas are,

The demand and supply for the initial price $P$, the trade domestic production $Q1$, the trade domestic consumption $Q2$, and import would be $(Q2-Q1)$.

When quota is imposed the domestic price is$Pt$, the domestic production is$Q3$, the domestic production is$Q4$, and the import quota is$(Q4-Q3)$.

Step 3. Difference between the two trade barriers.

The difference between the two trade barriers, quota and tariff is,