An import quota will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare.
A) increase; decrease; increase; have an ambiguous effect on
B) increase; decrease; decrease; decrease
C) increase; decrease; have no effect on; have an ambiguous effect on
D) increase; decrease; have no effect on; decrease
E) increase; increase; decrease; have an ambiguous effect on

Question

Quizplus · Accepted Answer

An import quota increases producer surplus by protecting domestic industries from foreign competition, decreases consumer surplus because consumers have to pay higher prices due to reduced competition, has no effect on government revenue because quotas are not a tax, and its effect on overall domestic national welfare is ambiguous because it depends on the specific circumstances of the economy, such as the efficiency of the domestic producers and the importance of the good in question.

An Import Quota Will ________ Producer Surplus, ________ Consumer Surplus

An Import Quota Will Producer Surplus, Consumer Surplus