Author Question: Explain three ways in which imposing a quota on imports may reduce a country's overall economic ... (Read 59 times)

piesebel · **on:** Jun 29, 2018

Explain three ways in which imposing a quota on imports may reduce a country's overall economic well-being.

What will be an ideal response?

Question 2

Refer to Figure 7.1. Suppose that instead of 350, Angus earns only 250 by playing the bagpipes, but all other earnings remain the same. Who values the property rights to the air more?

A) Angus
B) Dudley
C) They value the property rights equally.
D) Neither value the property rights.

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

Answer to Question 1

1. Quotas discourage lower-cost imported goods in favor of higher-cost domestic goods and therefore raise prices to consumers. Some of these consumers get priced out of the market and instead by goods they do not like as well.
2. Quotas encourage producers to enter or stay in protected industries, where productive resources would be better used in other industries.
3. Because exports pay for imports, quotas that discourage imports will also reduce exports, damaging the producers of those exports. Also, quotas might encourage retaliation by foreign countries, further damaging domestic exporters.

Answer to Question 2

B