Identify the truthfulness of the following statements.
I. In a perfectly competitive market, import quotas and tariffs tend to lead to higher domestic prices and deadweight loss.
II. In a perfectly competitive market, import quotas and tariffs tend to lead to higher domestic prices without the usual deadweight loss that would accompany them.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Question

Identify the truthfulness of the following statements. 
I. In a perfectly competitive market, import quotas and tariffs tend to lead to higher domestic prices and deadweight loss.
II. In a perfectly competitive market, import quotas and tariffs tend to lead to higher domestic prices without the usual deadweight loss that would accompany them.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Quizplus · Accepted Answer

In a perfectly competitive market, import quotas and tariffs tend to lead to higher domestic prices because they limit the supply of foreign goods and lead to decreased competition. This leads to deadweight loss because the higher prices reduce the quantity demanded by consumers. Therefore, statement I is true. However, statement II is false because even in a perfectly competitive market, import quotas and tariffs would still lead to some deadweight loss due to the higher prices.

Identify the Truthfulness of the Following Statements