If an import-competing firm is imperfectly competitive,than under free trade an import quota will ________ domestic market price,________ producer surplus,________ consumer surplus,________ government revenue,and ________ overall domestic national welfare.
A) increase; increase; decrease; have no effect on; decrease
B) decrease; decrease; increase; decrease; have no effect on
C) increase; have no effect on; decrease; increase; decrease
D) decrease; increase; decrease; increase; decrease
E) have no effect on; have no effect on; decrease; increase; decrease

Question

Quizplus · Accepted Answer

An import quota restricts the quantity of goods that can be imported, leading to a higher domestic market price. This benefits domestic producers by increasing producer surplus but harms consumers by decreasing consumer surplus. Government revenue is not directly affected by quotas, unlike tariffs. Overall, national welfare decreases due to the inefficiencies introduced by the quota.

If an Import-Competing Firm Is Imperfectly Competitive,than Under Free Trade