Assume that Canada imposes an import quota on Columbian coffee.Relative to the equilibrium world price that would prevail in the absence of import quotas,it is likely that the equilibrium price of coffee in Canada will _____ and the equilibrium price of coffee in Columbia will _____.

Question

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When Canada imposes an import quota on Columbian coffee, it restricts the amount of coffee that can be imported into the country. This reduces the supply of coffee in Canada and leads to an increase in the equilibrium price of coffee in Canada. On the other hand, since the supply of Columbian coffee to the world market remains unchanged, the price of coffee in Columbia will decrease due to excess supply. Therefore, the equilibrium price of coffee in Canada will increase and the equilibrium price of coffee in Columbia will decrease.

Assume That Canada Imposes an Import Quota on Columbian Coffee