Imposing a quota on the import of a good leads to _____ in the equilibrium quantity and _____ in the price of the good as compared to free trade.

Question

Quizplus · Accepted Answer

Imposing a quota on the import of a good reduces the supply of that good in the domestic market, leading to a decrease in the equilibrium quantity. Because the supply is restricted, the price of the good increases as compared to a situation of free trade where goods can be imported without limits.

Imposing a Quota on the Import of a Good Leads