Question

The Japanese government restricts imports of rice into Japan. This import quota causes A. a decrease in the consumer surplus of Japanese consumers. B. the price of rice to be lower than it would have been without the quota. C. Japanese production of rice to fall. D. a decrease in the producer surplus of Japanese rice growers.

Answer 1

Answer:. A. a decrease in the consumer surplus of Japanese consumers.

Explanation:

When an import quota is imposed, it has the effect of limiting the imports of a commodity into an economy.

The effect of this is that supply drops as goods are no longer coming in from outside.

Because of this drop in supply, there is a increase in price.

This increase will reduce the Consumer surplus.

How?

Consumer Surplus is defined as the price that consumers pay vs the price they are willing to pay.

Because there was more supply, they were paying a price less than what they were willing to pay. As this supply has now dropped, the price they are paying is now closed to the price they are willing to pay.

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