Explain three ways in which imposing a quota on imports may reduce a country's overall economic well-being
What will be an ideal response?
1. Quotas discourage lower-cost imported goods in favor of higher-cost domestic goods and therefore raise prices to consumers. Some of these consumers get priced out of the market and instead by goods they do not like as well.
2. Quotas encourage producers to enter or stay in protected industries, where productive resources would be better used in other industries.
3. Because exports pay for imports, quotas that discourage imports will also reduce exports, damaging the producers of those exports. Also, quotas might encourage retaliation by foreign countries, further damaging domestic exporters.
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If a quota is imposed on imports of shrimp into the United States, U.S. consumers ________ and U.S. producers ________
A) gain; gain B) lose; gain C) gain; are unaffected D) lose; lose E) gain; lose
Cyclical unemployment is caused by:
a. shifts in the job skills required in the economy. b. seasonal layoffs. c. declines in real GDP. d. cyclical changes in the job skills among workers.