Assume that the United States imposes an import quota on Brazilian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____, and the equilibrium price of coffee in Brazil will _____.

Question

Quizplus · Accepted Answer

When the US imposes an import quota on Brazilian coffee, the supply of coffee in the US market decreases. This leads to an increase in the equilibrium price of coffee in the US. On the other hand, in Brazil, there is excess supply which leads to a decrease in the equilibrium price of coffee in Brazil. Therefore, the equilibrium price of coffee increases in the US and decreases in Brazil.

Assume That the United States Imposes an Import Quota on Brazilian