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Suppose that this year tomato growers in Florida lobby the U.S. government to impose an import quota

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Suppose that this year tomato growers in Florida lobby the U.S. government to impose an import quota on Mexican tomatoes. Explain who in the United States would gain and who would lose from such a quota.

✅ Answers (1)

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Private answer

Here is a tip:
The import quota places a limit on the quantity that can be imported in a certain period.

Explanation
The decrease in the quantity imported due to quota raises the price of vegetable T. The consumers are now forced to pay more than the world price. Consequently, they lose the consumer surplus, whereas the domestic producers gain a surplus as they sell at a higher price and continue to produce more quantities of vegetable T.

The quota fetches profit for the holders of quota rights in the form of the revenue earned from it.

Verified Answer
The growers of vegetable T in Country U and the holders of quota rights gain, whereas the consumers in Country U lose. This is because the imposition of import quotas increases the price of vegetable T. Higher prices make the consumers worse off while benefitting the domestic producers.

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Answered on February 8, 2023 10:34 am

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