Which of the following situations will arise in the domestic market following the imposition of an import quota?

Question

Quizplus · Accepted Answer

Imposition of an import quota will limit the quantity of imports entering the domestic market. This will decrease imports and encourage domestic production. Due to increased domestic production, supply in the domestic market will increase and prices will fall. However, the reduced imports will also reduce competition, giving domestic producers the ability to raise prices, resulting in a higher price level. Therefore, the correct option is D.

Which of the Following Situations Will Arise in the Domestic