As part of a trade war, country A agrees to introduces a quota on cars imported from country B. Country A can then expectGroup of answer choicesthe price and the quality of cars imported from country B to decreasethe price of cars imported from country B to increase, and their quality to decreasethe price of cars imported from country B to decrease, and their quality to remain the samethe price and the quality of cars imported from country B to increase
Question
As part of a trade war, country A agrees to introduces a quota on cars imported from country B. Country A can then expectGroup of answer choicesthe price and the quality of cars imported from country B to decreasethe price of cars imported from country B to increase, and their quality to decreasethe price of cars imported from country B to decrease, and their quality to remain the samethe price and the quality of cars imported from country B to increase
Solution
The correct answer is "the price of cars imported from country B to increase, and their quality to decrease".
Here's why:
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When a quota is introduced, it limits the number of cars that can be imported from country B. This reduces the supply of cars from country B in country A.
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According to the law of supply and demand, when supply decreases and demand remains the same, the price increases. So, the price of cars imported from country B is expected to increase.
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As for the quality, it might decrease. This is because country B manufacturers, knowing that they can only export a limited number of cars, might focus on quantity rather than quality to maximize profits. They might also cut costs to stay competitive, which could lead to a decrease in quality.
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