Suppose that currently 4 million automobiles are imported into the U.S. and the average price of those automobiles is $25,000. Further suppose that Congress passes legislation approving a 5 million annual quota on imports, which is signed into law by the President. Which of the following statements correctly reflects the subsequent developments in the domestic U.S. automobile industry? a. Equilibrium price & quantity will decrease. b. Equilibrium price will increase and the quantity will decrease. c. Equilibrium price will decrease and the quantity will not change. d. Neither Equilibrium price nor quantity will be affected. e. none of the above statements is
Suppose that currently 4 million automobiles are imported into the U.S. and the average price of those automobiles is $25,000. Further suppose that Congress passes legislation approving a 5 million annual quota on imports, which is signed into law by the President. Which of the following statements correctly reflects the subsequent developments in the domestic U.S. automobile industry? a. Equilibrium price & quantity will decrease. b. Equilibrium price will increase and the quantity will decrease. c. Equilibrium price will decrease and the quantity will not change. d. Neither Equilibrium price nor quantity will be affected. e. none of the above statements is
Chapter17: International Trade
Section: Chapter Questions
Problem 2.5P
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