Chapter 44, Problem 2CYU

To determine

The type of smallest import quota that would not affect international trade.

Explanation of Solution

There is no effect on international trade when a small country implements a quota, its leads to a fall in the national welfare. The more restrictive the quota is, the larger will be the loss of national welfare. Thus, there is no impact on international welfare, although the loss is on national welfare.

An import quota imposed by a small country would not affect international trade. The imposition of quotas by small countries leads to a fall in national welfare.

Economics Concept Introduction

International trade: International trade is an exchange of goods and services across nations. This is due to globalization and comparative advantage. It means goods are produced in one country and are sold in some other country.