Tariff
In contrast, in economic theory tariffs are viewed as a primary element in international trade with the function of the tariff being to influence the flow of trade by lowering or raising the price of targeted goods to create what amounts to an artificial competitive advantage. When tariffs are viewed and used in this fashion, they are addressing the country's and the competitors' respective economic healths in terms of maximizing or minimizing revenue flow rather than in terms of the ability to generate and maintain a competitive advantage which is the source of the revenue. As a result, the impact of the tariffs on the economic health of the country are at best minimal but often are counter-productive.
Feed-in tariff
A feed-in tariff can differentiate on the basis of marginal cost. This is a theoretical alternative which is based on the concept of price differentiation (Finon). Under such a policy the tariff price ranges from some level slightly above the spot rate to the price required to obtain the optimal level of production determined by the government. Firms with lower marginal costs receive prices on the lower end of the spectrum that increase their revenue but not by as much as under the uniform feed-in tariff. The more marginal producers face the higher tariff price. This version of the policy has two objectives. The first is to reduce the profitability of certain production sites.