What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?
A)Equilibrium price and quantity should both go up.
B)Equilibrium price should go up,and equilibrium quantity should go down.
C)Equilibrium price should go down,and equilibrium quantity should go up.
D)Equilibrium price and quantity should both go down.

Question

Quizplus · Accepted Answer

A quota on imports restricts the quantity of imported goods that can be sold in the market. This results in a decrease in supply and an increase in the price of the imported goods. As the price of the imported goods increases, domestic producers can charge higher prices for their products as well. This leads to an increase in the equilibrium price. However, since the quantity of imported goods is restricted, there will be a decrease in the total quantity supplied, resulting in a decrease in the equilibrium quantity. Therefore, the correct answer is B.

What Should Happen to the Equilibrium Price and Quantity in a Market