An import quota: increases the domestic price of the imported commodity reduces

Question

An import quota: increases the domestic price of the imported commodity reduces domestic consumption increase domestic production all of the above The infart-industry argument for protection is that traces should be imposed to protect from completion industries that are essential if a country is to be an industrial nation industries that cannot compete with foreign competitions at this point in time, but will be able to once they gain some size and experience industries that can compete with foreign compactors at this point in time, but deemed sensational by the government Dumping is: selling a good abroad at a price below cost or below the price changed in the domestic market A difference between a quota and a tariff is that a tariff generates a higher price than a quota does a tariff generates a greater reduction in exports a quota increases the profits of domestic producers more than a tariff does the government collects revenue from a tariff, which does not happen with a quota

Explanation / Answer

18. Correct Answer is (d) - All of the above.

Import quota is a protectionist device to restrict the supply of a good or service from abroad.Under an import quota, a fixed amount of a commodity in volume or value is allowed to be imported into the country during a ficed period of time, usually a year. Impoer quotas aim at restricting and regulating imports in order to protect domestic industries from foreign competetion & to correct disequilibrium in the BOP.

The Objective of the import quota are : 1. To protect domestic industries from foreign competition by restricting imports. 2. To correct an adverse balance of payments, restricting Imports. 3. To controle speculation in imports. 4. To stabilize and maintain internal price level by regulating imports . 5 To save the countries foreign exchange for importing essential raw materials , capital goods & other import items. 6. To discourage the import of luxury goods.

19. Correct Answer is (C)

Explanation: The infant industries cannot compete with foreign competition at their initial period, but will be able to compete once they gain size & experience. So tariff protection is vital to protect them from competetion.

20. Correct answer is (d)

Explanation: Dumping is an international price discrimination in which an exporter firm sells a portion of its output in a forign market at a very low price and the remainaing output at a high price in the domestic market.

21. Correct answer is (d)

Explanation: A tariff benefits the government in the form of additional revenue earned by leving a tariff duty, while an import quota brings profits to importers to holding licence.

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