The automobile industry in Macroland successfully lobbies for import quotas that result in automobile prices that are $1,000 higher than before the quotas. Increased sales of automobiles produced in Macroland protect the jobs of 20,000 automobile workers. What is an additional consequence of the quotas that is not as attractive for Macroland's economy?

Question

Quizplus · Accepted Answer

The higher automobile prices due to the import quotas means that each citizen will have $1,000 less to spend on other products, leading to reduced sales and fewer jobs in other industries. This is because consumers will have to allocate more of their budget towards the higher-priced cars, leaving less money for other goods and services. Option A does not necessarily have to be true, as the government could potentially gain revenue from the quotas through tariffs or fees. Option B is unlikely, as other automobile producers may not be able to reduce prices enough to compete with the protected Macroland automobile industry. Option D is not necessarily true, as the market could still remain in equilibrium if consumers are willing to pay the higher prices.

The Automobile Industry in Macroland Successfully Lobbies for Import Quotas