Import quotas tend to result in all of the following except:

 Options:

a. domestic producers of the imported good being harmed b. domestic consumers of the imported good being harmed c. prices increasing in the importing country d. prices falling in the exporting country

The Correct Answer Is:

a. domestic producers of the imported good being harmed

Import quotas are government-imposed restrictions on the quantity of a specific good that can be imported into a country during a specified period. They are typically used to protect domestic industries from foreign competition, regulate the balance of trade, or for national security reasons.

When an import quota is implemented, it tends to have several economic effects, some of which are outlined in the options provided.

The correct answer is:

a. domestic producers of the imported good being harmed

This statement is correct. Import quotas can harm domestic producers of the imported good. When a quota is imposed, it limits the amount of the imported good that can enter the domestic market.

This reduces competition for domestic producers, allowing them to sell their goods at higher prices and potentially generating more revenue. If there were no quota, domestic producers might face stiff competition from cheaper foreign imports, which could lower their prices and profits.

Therefore, import quotas protect domestic producers from the full force of international competition.

Now, let’s examine why the other options are not correct:

b. domestic consumers of the imported good being harmed

When an import quota is imposed, it limits the quantity of the imported good available in the domestic market. This can lead to higher prices for the imported product, which can potentially harm domestic consumers who will have to pay more for it.

This is because the reduced supply increases demand, which in turn can lead to price increases. So, option b is correct. Domestic consumers may experience a decrease in their purchasing power due to the higher prices of imported goods.

c. prices increasing in the importing country

As mentioned in option b, when an import quota is put in place, it limits the quantity of the imported good available. This reduced supply, coupled with constant or increasing demand, tends to drive prices up.

This is known as price inflation. The increased prices can have various effects on the economy, such as altering consumer behavior and impacting overall inflation rates. Therefore, option c is also correct.

d. prices falling in the exporting country

This option is incorrect. When an import quota is implemented, it limits the amount of the imported good that can enter the domestic market of the importing country. This reduction in supply in the importing country doesn’t directly impact the prices in the exporting country.

In fact, due to reduced competition in the importing country, domestic producers in the exporting country may actually benefit from higher prices when exporting to that market. Therefore, option d is not correct.

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