Which of the following statements about quotas is correct?
A)They benefit domestic consumers through lower prices.
B)They benefit domestic producers through higher prices.
C)They raise world output.
D)They cause outward shifts in the domestic and foreign production possibilities frontiers.
E)They benefit domestic producers through increased competition that stimulates innovation.

Question

Quizplus · Accepted Answer

Quotas restrict imports and therefore reduce competition for domestic producers, leading to higher prices and potentially higher profits for domestic producers. This benefit comes at the expense of domestic consumers who may face higher prices. Quotas do not necessarily benefit the domestic economy as a whole, and can actually reduce world output if they lead to less efficient allocation of resources. Quotas do not cause shifts in production possibilities frontiers, and they do not necessarily stimulate innovation among domestic producers.

Which of the Following Statements About Quotas Is Correct