Question

Which of the following is the most likely result of a quota that limits the importation of steel into the United States? a. a reduction in the price of steel in the U.S. market b. a reduction in the cost of producing goods that utilize steel as a resource c. an increase in U.S. exports of steel d. a reduction in output and employment in domestic industries that utilize steel as a resource

Answer 1

Answer:

• d. a reduction in output and employment in domestic industries that utilize steel as a resource

Explanation:

The first impact of a quota that limits the importation of steel into the United States is that the domestic market will experience a decrease on the number of suppliers.

As a consequence, the domestic manufacturers will have less competition and they will be able to increase the prices of the steel in the domestic market, instead of struggling to decrease the costs, or improve the quality, or increase the productivity, or enhance the service.

Thus, the domestic indutries that utilize the steel will face an increase on the prices of their main raw material, becoming less competitive. Then, most likely, their price should increase and their sales and production should decrease; thus, they will face a reduction in output and employment.