Which of the following is true about a quota?
A)Makes domestic consumers better off.
B)Makes both domestic producers and consumers better off.
C)Makes everyone worse off.
D)Makes domestic producers better off.

Question

Quizplus · Accepted Answer

A quota limits the quantity of imports and therefore, domestic producers are protected from foreign competition. This leads to an increase in domestic production and higher prices for consumers, resulting in a transfer of consumer surplus to producer surplus. Hence, it makes domestic producers better off, but not necessarily domestic consumers or the overall economy.

Which of the Following Is True About a Quota