Question

If the government uses a quota to restrict imports of​ foreign-made shoes into the​ U.S., A. the price of shoes in the U.S. will​ increase, and U.S. firms will produce fewer shoes. B. the price of shoes in the U.S. will​ decrease, and U.S. firms will produce more shoes. C. the price of shoes in the U.S. will​ increase, and U.S. firms will produce more shoes. D. the price of shoes in the U.S. will​ decrease, and U.S. firms will produce fewer shoes.

Answer 1

c

Step-by-step explanation:

A quota occurs when the government or an agency of the government limits the quantity of goods that can be imported or exported in a country.

A quota increases the price of goods and services if the quota is enacted by the importing country. This would lead to an increase in producer surplus and a reduction in consumer surplus.

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Consumer surplus = willingness to pay – price of the good

Producer surplus is the difference between the price of a good and the least price the seller is willing to sell the product

according to the law of supply, the higher the price, the higher the quantity supplied and the lower the price, the lower the quantity supplied.

Producer surplus = price – least price the seller is willing to accept

The increase in price as a result of the quota would lead to an increase in the quantity of the product been supplied. This is in line with the law of supply