In: Economics
Cotton growers in the nation of Zanzi export nearly 700,000 bales of cotton every year. Zanzi is the home country for a major fabric manufacturing facility that exports high-quality cotton fabric around the world. The government imposed a quota of 1 million bales of cotton that can be imported into Zanzi every year. The local fabric manufacturer is lobbying the government to remove the quota on cotton.
1. Which of the following could be the government’s rationale for imposing the import quota on cotton?
A) The cotton growers in Zanzi will suffer from competition against imported cotton.
B) The cotton farming industry generates a great amount of tax revenue for the government
C) A large number of Zanzi farmers work on cotton farms.
D) All of the above
2. Which of the following supports abolishing the cotton import quota over maintaining it?
Group of answer choices
A) The cotton growers in Zanzi will suffer from competition against imported cotton.
B) The major fabric manufacturer may move to a country that does not impose cotton import quotas.
C) A large number of Zanzi farmers work on cotton farms.
D) Global cotton and cotton fabric prices have fluctuated mildly in recent years.
3. Which of the following best supports maintaining the existing cotton quota?
Group of answer choices
A) Zanzi cotton growers are protected from competition with cheaper cotton imports.
B) Zanzi cotton growers have an advantage when they export.
C) The local fabric manufacturer pays high prices for cotton.
D) The local fabric manufacturer uses mostly Zanzi-grown cotton.
4. What may happen if the Zani government abolishes the cotton import quota?
Group of answer choices
A) Zani cotton growers will have to lower their price to compete with imported cotton
B) Zani cotton growers will have to improve their quality to compete with imported cotton
C) the local fabric manufacturer becomes more competitive in the global market of high-quality cotton fabric
D) All of the above
Answer
1.D) All of the above
This is for the social and economic benefit of the cotton farmers
of Zanzi. Aditionally the government will also gain some revenue
from cotton producers domestically.
2.B) The major fabric manufacturer may move to a country
that does not impose cotton import quotas.
Cost of imput for fabric manufaccturer will rise, this may lead
them to move out to a nation where its more profitable.
3.C) The local fabric manufacturer pays high prices for
cotton
This will lead to increased revenue for cotton Farmers of
Zanzi.
4.A) Zani cotton growers will have to lower their price
to compete with imported cotton
The occurence of option B and C is very low , it is often seen for
industrial goods where there is a perfect competition, lower
quality cheaper goods substitute quality goods, this will lower
famers profit in Zanzi.
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