Suppose Norway, which imports computers under free trade, imposes an import quota of 800 computers to reduce imports. Compared with free trade, what happens to Norway’s consumer surplus and producer surplus?
Correct answer D. Decrease, increase
Explanation
A binding quota raises the domestic price, so consumers pay more and buy less, losing surplus, while domestic producers sell more at a higher price and gain surplus.
Answer checked How we write and check questions
Discussion