Question

Which of the following will likely occur if Israel imposes a quota on automobiles imported from the United States?
A. Israeli consumers will purchase fewer automobiles; and Israeli producers will manufacture fewer automobiles
B. Israeli will purchase more automobiles, and Israeli producers will manufacture fewer automobiles
C. Israeli consumers will purchase fewer automobiles, and Israeli producers will manufacture more automobiles
D. Israeli consumers will purchase more automobiles, and Israeli producers will manufacture more automobiles

Answer 1

C. Israeli consumers will purchase fewer automobiles, and Israeli producers will manufacture more automobiles.

Explanation: The quota reduces the supply of U.S. cars, raising the market price in Israel. Higher prices lower total car purchases by consumers, while domestic producers expand output to replace some of the restricted imports.