Assume that the United States imposes an import quota on Scottish wool suits.Relative to the equilibrium price that would prevail in the absence of quotas,the equilibrium price of suits in the United States will most likely _____ and the equilibrium price of suits in Scotland will most likely _____.

Question

Quizplus · Accepted Answer

When the United States imposes an import quota on Scottish wool suits, the supply of Scottish wool suits in the US market will decrease. This will cause an increase in the price of Scottish wool suits in the US market. At the same time, the decrease in demand for Scottish wool suits in the US market will cause a decrease in the price of Scottish wool suits in Scotland. Therefore, the equilibrium price of suits in the United States will most likely increase, and the equilibrium price of suits in Scotland will most likely decrease.

Assume That the United States Imposes an Import Quota on Scottish