Author Question: How does a quota affect the domestic price of the import, the domestic consumption, the domestic ... (Read 245 times)

Beheh · **on:** Jun 29, 2018

How does a quota affect the domestic price of the import, the domestic consumption, the domestic production, and the quantity imported?

What will be an ideal response?

Question 2

Refer to the scenario above. How will the demand for pens faced by the existing pen manufacturers in Eduland be affected if several firms exit the industry in the long run?

A) The demand curve by existing firms will become perfectly inelastic.
B) The demand curve by existing firms will become perfectly elastic.
C) The demand faced by existing firms will increase.
D) The demand faced by existing firms will decrease.

aprice35067 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A quota raises the price of the good because it decreases the amount that can be imported. As a result, domestic consumption decreases as domestic consumers decrease the quantity they demand. And, also as a result, domestic production increases as domestic producers increase the quantity they supply.

Answer to Question 2

C