APFIVE Effects Of An Import Quota
When a government imposes a binding import quota on a good, which of the following outcomes is most likely to occur in the domestic market?
A
Elimination of consumer surplus coupled with a significant increase in deadweight loss.
B
No change in market equilibrium because the quota is evenly allocated among all importers.
C
An increase in total market quantity as domestic production expands to fill the gap.
D
A reduction in total market quantity and the creation of a quota rent that benefits domestic producers.
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