S. Klepper, Economics 73-100, Fall 2008

Quiz 6

Suppose, as in Quiz 5, the government restricts imports of textiles into the United States, causing the price of imported textiles to rise. Assume that imported textiles are imperfect substitutes for U.S. textiles and that prior to the import restriction the U.S. textile industry was in long-run equilibrium.

Which of the following statements concerning the effects of the import restriction in the long run are correct? Mark true for a correct answer and false for an incorrect one and provide explanations for each of your answers.

_____1. The marginal cost of U.S. textile producers falls at every level of output.

_____2. The market demand curve for U.S. textiles shifts to the right.

_____3. The price of U.S. textiles rises.

_____4. U.S. textile producers increase their (collective) output.

_____5. The total amount spent by consumers on U.S. textiles increases.