Assume that the United States imposes an import quota on Italian shoes. Relative
ID: 1197679 • Letter: A
Question
Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _____, and the equilibrium price of shoes in Italy will most likely _____. increase; decrease decrease; remain the same decrease; increase increase; remain the same Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _____, and the equilibrium price of shoes in Italy will most likely _____. increase; decrease decrease; remain the same decrease; increase increase; remain the sameExplanation / Answer
decrease; increase.
US import Italian shoes means, Italy owes comparative advantage in production of shoes. Hence, after trade with absence of quota price of shoes in US will fall due to higher supply and rise in Italy due to lower supply.