- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 6. International Trade
- Subject 2. International Trade Restrictions and Agreements
CFA Practice Question
An import quota ______
B. increases domestic production and reduces domestic prices.
C. reduces domestic production and increases domestic prices.
A. increases both domestic production and domestic prices.
B. increases domestic production and reduces domestic prices.
C. reduces domestic production and increases domestic prices.
Correct Answer: A
An import quota limits the volume of imports and creates a shortage that drives up the price of a domestically produced good. Domestic production increases as a result of the increase in the price of the domestically produced good.
User Contributed Comments 1
| User | Comment |
|---|---|
| choas69 | Tariffs - Quotas - VER - & Export subsidies result in: 1- import falls. 2- higher prices. 3- consumer surplus falls. 4- producer surplus rises. 5- domestic quantity supplied rises. |