Assume that the United States imposes a quota on Scottish wool suits.Relative to the equilibrium price that would exist in the absence of quotas, the equilibrium price of suits in the United States will most likely _______ , and the equilibrium price of suits in Scotland will most likely _______ .

Question

Quizplus · Accepted Answer

When the United States imposes a quota on Scottish wool suits, it limits the quantity of suits that can be imported into the country. This will decrease the supply of Scottish wool suits available in the United States market, causing the price to increase (based on the law of supply and demand). Additionally, the decrease in demand in Scotland will result in a surplus of suits, which will drive down the price in their domestic market. Therefore, the equilibrium price of suits in the United States will increase, and the equilibrium price of suits in Scotland will decrease.

Assume That the United States Imposes a Quota on Scottish