Question

During the past five years, the nation of Andolvia began a massive undertaking: teaching farmers how to successfully grow and harvest peanuts. The government subsidized the building of peanut processing plants, where private businesses are now producing peanut butter and other products of nutritional value. Although the Andolvia government has not completely banned the importation of peanuts, it has placed ________________ on the number of peanut products that the nation can import each year, in order to protect Andolvia's young peanut industry.
a) counter measures
b) subsidiaries
c) import quotas
d) embargoes

Answer 1

Answer:

The correct option is C,import quotas.

Explanation:

Import quota is an approach to prevent home industries from high foreign competition by placing a ceiling on the quantity of locally manufactured goods that can be imported.

By import quotas,the businesses are provided a level playing ground to thrive as they able to sell their products at reasonable prices and not chased out of business by foreign manufacturers that produce in large quantity at reduced cost in order to sell at a very competitive price.

Answer 2

Answer:

C) import quotas

Explanation:

Import quotas are a type of trade barrier that is placed to reduce foreign competition from domestic producer. Import quotas along with tariffs (taxes on imports) distort domestic markets because even though the producers of peanuts will benefit, the consumers will suffer due to artificially high prices. Generally the lost consumer surplus outweighs the supplier surplus generated by import quotas or tariffs resulting a net economic loss for the country.

Sadly import quotas and tariffs are popular even in the US, because politicians claim that they are supporting local industries, but at the end the customers end up paying the higher costs.