Quotas that limit the quantity of imports of a foreign good provide an incentive for foreign suppliers to
I.provide higher quality goods.
II.seek more open markets elsewhere.
III.lower prices to be more competitive.
IV.stop all trade with the country imposing the quotas.
Which of the above statements are true?
A)I and II.
B)I and III.
C)II and IV.
D)I,III,and IV.
E)III only.

Question

Quotas that limit the quantity of imports of a foreign good provide an incentive for foreign suppliers to 
I.provide higher quality goods.
II.seek more open markets elsewhere.
III.lower prices to be more competitive.
IV.stop all trade with the country imposing the quotas.
Which of the above statements are true?
A)I and II.
B)I and III.
C)II and IV.
D)I,III,and IV.
E)III only.

Quizplus · Accepted Answer

Quotas limit the quantity of imports, which can lead foreign suppliers to focus on providing higher quality goods to maximize their limited sales (I) and to seek markets with fewer restrictions (II). Lowering prices (III) is less likely since the quota limits supply, potentially increasing prices. Stopping all trade (IV) is extreme and unlikely.

Quotas That Limit the Quantity of Imports of a Foreign