When Australia imposes an import quota on a good, the amount of the _______ in Australian consumer surplus is _______ the amount of the _______ in Australian producer surplus.
A) decrease; larger than; increase
B) decrease; equal to; increase
C) increase; smaller than; increase
D) decrease; larger than; decrease

Question

Quizplus · Accepted Answer

When Australia imposes an import quota on a good, it limits the quantity of that good that can be imported. This typically leads to higher prices for the good within Australia, which benefits domestic producers by increasing their producer surplus but harms consumers by decreasing their consumer surplus. The decrease in consumer surplus is generally larger than the increase in producer surplus because the higher prices also result in a deadweight loss, reflecting inefficiencies and lost gains from trade.

When Australia Imposes an Import Quota on a Good, the Amount