Which of the following is NOT an effect of an import quota imposed by a small nation?
A) It raises producer prices.
B) It generates revenue for the nation.
C) It causes more production by domestic industries.
D) It causes a reduction in imports of the product.

Question

Quizplus · Accepted Answer

An import quota imposed by a small nation restricts the amount of imports of a product. As a result, the price of the product in the domestic market increases, which creates an incentive for domestic producers to increase production. This leads to higher producer prices and a reduction in imports of the product. However, it does not necessarily generate revenue for the nation as it would in the case of a tariff.

Which of the Following Is NOT an Effect of an Import