Draw a diagram depicting a small importing country with a nonprohibitiveimport tariff (T) in place. On the diagram indicate the tariff rate and theequivalent import quota (Q) that would generate the same domestic price. Next, suppose there is a decrease in domestic demand for the good.
a) Indicate on the graph the new equilibrium with the tariff in place and thequota in place.
b) Indicate the new level of imports with the tariff and quota. Which islarger?
c) Indicate the new domestic price with the tariff and the quota. Which ishigher?
d) Which is more protective of the domestic import-competing industry inthis situation, a tariff or a quota? Explain why.