Help needed for multiple choice (1 Viewer)

[spham491]

Hey guys can someone explain why 2006 q7 of the multiple choice is D? I thought quotas don't cause a shift in the supply curve.

Thanks!

https://www.boardofstudies.nsw.edu.au/hsc_exams/hsc2006exams/pdf_doc/economics_06.pdf

 

[Zoinked]

Quotas cause a shift in the supply curve because they affect the amount of a good that is imported, thus causing a shift in the total quantity in the domestic market. It is D because the supply is shifting to the left, thus there is less imports. Logically, with less imports (a smaller quota), there is less competition for local car producers.

 

[spham491]

Ahh that makes sense. Thanks for the help.