Chapter 44, Problem 5MCQ

To determine

The correct option that would result if country C imposed an import quota on cell phones.

Answer to Problem 5MCQ

Option d is correct.

Explanation of Solution

Explanation for the correct option:

d.

Import quota refers to a type of restriction where countries are defined to import a certain percentage of quantity not beyond that. Country C’s population would be forced to purchase cell phones manufactured in country C only. Therefore, option d is correct.

Explanation for incorrect options:

a.

Prices of cell phones will not increase instead demand for domestic goods will increase. Therefore, option a is the incorrect answer.

b.

Import quotas will restrict buying outside country C which will reduce their tax collection. Therefore, option b is incorrect.

c.

Import quotas will restrict trade from outside the country. Therefore, option c is incorrect.

e.

The imposition of import quotas will restrict trade from all sources. Therefore, option e is incorrect.

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.