Question

Read the following scenario and answer question 1-4.

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?

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?

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?

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

1. D All of the above

All of these are reasons for the government to impose import quota. This is for both soceital and economice benefit for Zanzi.

2. B) The major fabric manufacturer may move to a country that does not impose cotton import quotas.

This is true, as the cost of imput for fabric manufacturers will rise

3.C. the local fabric manufacturer pays high price for cotton

The import quota, should not effect the fabric manufacturers much if they are used to paying a high price for cotton, this will enable cotton farming to be more profitable.

4.A) Zani cotton growers will have to lower their price to compete with imported cotton

This will be the effect. The other two options are unlikely to happen in a perfectly competitive market.

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