Author Question: Stocks represent partial ownership of a firm. Indicate whether the statement is true or ... (Read 393 times)

nummyann · **on:** Jun 29, 2018

Stocks represent partial ownership of a firm.

Indicate whether the statement is true or false

Question 2

Explain who gains and who loses from an import quota and why the losses exceed the gains.

What will be an ideal response?

sabina576 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

TRUE

Answer to Question 2

Domestic consumers lose from the import quota. Domestic producers gain from the import quota. The importers also gain additional profit from the import quota. But the gain to producers plus the importers' profits is less than the loss to consumers, so on net an import quota creates a social loss. There is a social loss for two reasons: First, high-cost domestic production expands, so society uses more resources producing some high-cost units of the good than it would use if low-cost foreign units were purchased. Second the high price leads domestic consumers to decrease their consumption of the good, thereby robbing society of the benefits these units would have produced.