CFA Practice Question

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CFA Practice Question

An import quota ______

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.
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