Question
A country imposes a quota on imported cotton to protect its domestic cotton industry.
What is the likely economic impact of this decision, and which trade restriction is being used?
Increased competition from foreign producers; tariff
Reduced domestic production; tariff
Complete ban on cotton imports; embargo
Limited supply of imported cotton; quota
What is the likely economic impact of this decision, and which trade restriction is being used?
Increased competition from foreign producers; tariff
Reduced domestic production; tariff
Complete ban on cotton imports; embargo
Limited supply of imported cotton; quota
Answers
GPT-4o mini
The likely economic impact of imposing a quota on imported cotton is **limited supply of imported cotton**, which is indeed a **quota** being used as the trade restriction.
By setting a limit on the amount of cotton that can be imported, the government restricts the supply of foreign cotton in the domestic market. This can lead to higher prices for cotton in the domestic market, which may benefit local cotton producers by shielding them from foreign competition. However, consumers may face higher prices and fewer choices in cotton products due to the limited availability of imported cotton.
So, the correct answer is: **Limited supply of imported cotton; quota.**
By setting a limit on the amount of cotton that can be imported, the government restricts the supply of foreign cotton in the domestic market. This can lead to higher prices for cotton in the domestic market, which may benefit local cotton producers by shielding them from foreign competition. However, consumers may face higher prices and fewer choices in cotton products due to the limited availability of imported cotton.
So, the correct answer is: **Limited supply of imported cotton; quota.**