Suppose quotas are imposed on the importation of avocados. This has the effect of _____ the domestic price of avocados, as well as having the effect of _____ the imported price of avocados.

Question

Quizplus · Accepted Answer

Imposing quotas on the importation of avocados limits the supply of avocados in the domestic market, which increases the domestic price due to scarcity. Similarly, the price of imported avocados increases because the quota makes them more scarce and potentially more valuable in the domestic market.

Suppose Quotas Are Imposed on the Importation of Avocados