To reduce imports, suppose that the government of Norway's imposes a quota equal to 800 computers, Compared to what occurred under free trade, Norway's consumers surplus will ________ and its producer surplus will _______ Can you calculate these amounts? Try plotting the information of this table on a sheet of graph paper ?
Correct answer: C. decrease, increase
- A. increase, increase
- B. increase, decrease
- C. decrease, increase
- D. decrease, decrease
Explanation
A binding quota reduces imports and raises Norway's domestic price relative to free trade. Consumers lose surplus because they pay more, while domestic producers gain surplus from the higher price.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,742 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Microeconomics questions
During periods of growing domestic demand, an import quota ?
If imports licenses are auctioned off to domestic importers in competitive market their scarcity value (revenue effect) accrues to ?
Import quotas tend to result in all of the following except ?
Antidumping duties are used to ?
In a tariff and import quota lead to equivalent increase in the domestic price of steel, then ?
If a tariff and import quota lead to equivalent increases in the domestic price of steel, then ?