If a country is small in world markets and imports some product at the world price,the country effectively faces a horizontal foreign supply curve for that product.If the country then restricts the volume of imports by imposing an import quota,the effect on the domestic market for that product is to

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When a small country imposes an import quota, it limits the quantity of imports to a certain level. This effectively makes the foreign supply curve a vertical line because the quantity of imports cannot increase even if the price of the product increases. This creates a shortage in the domestic market, and the domestic price rises to maintain equilibrium.

If a Country Is Small in World Markets and Imports