Increasing Import Quota Boosts Supply and Lowers Prices

Steps:

• Define import quota as a limit on foreign goods entering the market.
• Recognize that increasing the quota allows more cars to be imported.
• Analyze supply impact: more imports raise total car supply in the domestic market.
• Determine price effect: increased supply, with demand constant, drives down car prices.

Why B is correct:

• Law of supply and demand: greater supply shifts the supply curve right, lowering equilibrium price for consumers.

Why the others are wrong:

• A: More imports compete with domestic producers, potentially reducing rather than creating jobs.
• C: Increased trade from higher quotas enhances specialization via comparative advantage.
• D: Expanding quotas promotes trade, making retaliation unlikely.

Final answer: B