Suppose an import-competing firm is imperfectly competitive.Replacement of an export tariff with an import quota that yields the same level of imports will ________ market price,________ producer surplus,________ consumer surplus,________ government revenue,and ________ overall domestic national welfare.
A) increase; increase; decrease; decrease; decrease
B) have no effect on; have no effect on; have no effect on; decrease; decrease
C) increase; have no effect on; decrease; decrease; increase
D) increase; increase; increase; decrease; have an ambiguous effect on
E) decrease; decrease; increase; decrease; increase

Question

Quizplus · Accepted Answer

Replacing an export tariff with an import quota would decrease the quantity of imported goods, resulting in an increase in market price. A decrease in imports would result in a decrease in consumer surplus and a decrease in government revenue since the import quota does not generate any revenue. The increase in market price and the decrease in consumer surplus would lead to a decrease in producer surplus. The overall domestic national welfare would decrease due to the decrease in consumer surplus and producer surplus.

Suppose an Import-Competing Firm Is Imperfectly Competitive