Assume that the United States imposes an import quota on English wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____, and the equilibrium price of suits in England will most likely _____.

Question

Quizplus · Accepted Answer

When the United States imposes an import quota on English wool suits, the supply of suits in the US will decrease as less suits are now available for import. This decrease in supply will cause the price of suits in the US to increase. On the other hand, the decrease in demand for English wool suits due to the import quota will cause the price of suits in England to decrease. Therefore, the equilibrium price of suits in the US will increase and the equilibrium price of suits in England will decrease.

Assume That the United States Imposes an Import Quota on English