If quotas on sugar were eliminated in the United States, domestic production of sugar would fall. Why is this a benefit in economic terms for the United States? I. because it frees up resources that could be used more efficiently elsewhere II. because it allows foreign producers of sugar to earn income and thus those countries are better off III. U.S. consumers are able to enjoy increased consumer surplus because of the lower prices of imported sugar.

Question

Quizplus · Accepted Answer

If quotas on sugar were eliminated in the US, domestic producers would face more competition from foreign producers and would have to produce sugar at a lower cost to remain competitive. This could lead to a decrease in domestic production of sugar, but it would also free up resources that could be used in other more efficient sectors of the economy, such as technology or healthcare. Additionally, U.S. consumers would benefit from lower prices of imported sugar, which would increase consumer surplus. Therefore, the correct answer is B (I and III only). While foreign producers may benefit from increased sales to the US, this is not a significant benefit to the US economy as a whole.

If Quotas on Sugar Were Eliminated in the United States