If a quota is imposed on imports of prawns into Australia, Australian consumer surplus from prawns will ________ and Australian producer surplus from prawns will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change

Question

Quizplus · Accepted Answer

Imposing a quota on imports of prawns will decrease the supply of prawns in the Australian market, causing an increase in the price of prawns. This will result in a decrease in the quantity demanded of prawns and a decrease in Australian consumer surplus. On the other hand, Australian producers will benefit from the limited competition and increased price, resulting in an increase in producer surplus.

If a Quota Is Imposed on Imports of Prawns into Australia