Assume that Canada imposes an import quota on Italian shoes.Relative to the equilibrium world price that would exist in the absence of import quotas,the equilibrium price of shoes in Canada will most likely _____ and the equilibrium price of shoes in Italy will most likely _____.

Question

Quizplus · Accepted Answer

When Canada imposes an import quota on Italian shoes, the supply of Italian shoes in the Canadian market decreases, which causes an increase in the price of shoes in Canada. At the same time, the reduction in exports to Canada reduces the demand for Italian shoes in Italy. Therefore, the equilibrium price of shoes in Italy will most likely decrease.

Assume That Canada Imposes an Import Quota on Italian Shoes