In a perfectly competitive market, an import quota:
A)sets a minimum level of production that domestic firms must produce.
B)sets a minimum level of imports for a country.
C)sets a maximum level of production that domestic firms may produce.
D)sets a maximum level of imports into a country.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, an import quota sets a limit on the quantity of a good that can be imported into a country. This limit sets a maximum level of imports, not a minimum, and therefore choice D is the correct answer. Choices A and C are not applicable to the concept of import quotas. Choice B is incorrect as it suggests that the quota sets a requirement for a minimum level of imports, which is not the case. In a perfectly competitive market, an import quota sets a maximum level of imports into the country. This is often done by the government to protect domestic industries from foreign competition by restricting the amount of foreign products that can be imported into the country. The quota usually limits the amount of a particular product that can be imported over a certain period, called the quota period.

In a Perfectly Competitive Market, an Import Quota