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.
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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.
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