Import Quota Effects on Domestic Production and Imports

Steps:

• Domestic production without quota is Q1 at world price.
• Quota raises domestic price, increasing production to Q2.
• Change in domestic supply is Q2 - Q1.
• Quota limits imports to difference between consumption Q3 and new production Q2, so size is Q3 - Q2.

Why A is correct:

• A directly matches the quota's impact: production rises by Q2 - Q1 per standard trade model, and quota size equals restricted imports Q3 - Q2.

Why the others are wrong:

• B confuses production change with total consumption and full free-trade imports.
• C reverses quota size and misstates production change.
• D swaps production change with free-trade imports and misidentifies quota.

Final answer: A