CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Imposing a restrictive quota on the import of spiked track shoes will likely ______
A. increase both the price of the shoes and the quantity consumed.
B. leave the price of the shoes unchanged and also leave the quantity consumed unchanged, since domestic producers will expand output to make up for the reduction in the supply of the imported shoes.
C. increase the price of the shoes but decrease the quantity consumed.
Explanation: Restricted foreign supply implies that the supply of the good will fall. Domestic supply will rise but not to a level high enough to maintain the same level of supply in the market. Domestic producers enjoy a higher price as a result of the restricted supply. The higher price in the market implies that domestic consumption will fall.

User Contributed Comments 1

User Comment
steved333 at least in the short run
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