Which of the following correctly identifies the effect of an import quota on a good?
A)Domestic producers do not gain from an import quota.
B)The gain to domestic producers is higher than the loss to domestic consumers.
C)Prices in the global market will fall due to the imposition of an import quota.
D)Domestic consumers bear the burden of an import quota in terms of higher domestic prices.

Question

Quizplus · Accepted Answer

An import quota limits the quantity of a good that can be imported into a country, which reduces competition for domestic producers. This allows domestic producers to increase prices, as they face less competition. As a result, domestic consumers have to pay higher prices for the same good, which means they bear the burden of the import quota. Therefore, choice D is correct. Choice A is incorrect because domestic producers do benefit from an import quota. Choice B is incorrect because the gain to domestic producers is not always higher than the loss to domestic consumers. Choice C is incorrect because prices in the global market are more likely to rise rather than fall due to an import quota, as there is less supply available in the global market.

Which of the Following Correctly Identifies the Effect of an Import