The Major Impact of American Textile Quotas

C

Import quotas cause the market price for the imported good to rise domestically. This hurts consumers but helps domestic producers who in addition to gaining market share also enjoy a higher price.

The correct answer to the question is C. higher prices for American consumers, a narrower selection of products, and less competition in the U.S. textile industry.

When American textile manufacturers and union members lobby successfully for restrictive quotas limiting the importation of textile products, it means that the government imposes restrictions on the quantity of textile products that can be imported into the United States. This is done to protect domestic textile industries and preserve jobs.

The major impact of these quotas is that it leads to higher prices for American consumers. With restricted imports, the domestic supply of textile products becomes limited. As a result, the demand for these products may exceed the available supply, leading to higher prices. The reduced competition from foreign imports also contributes to higher prices, as domestic producers face less pressure to keep prices competitive.

Additionally, the quotas result in a narrower selection of products for American consumers. With limited imports, there is a reduced variety of textile products available in the market. Consumers may have fewer options to choose from, limiting their ability to find products that best suit their preferences.

Furthermore, the quotas lead to less competition in the U.S. textile industry. By restricting imports, the government provides protection to domestic manufacturers, shielding them from foreign competition. This reduced competition can result in a less efficient and less innovative domestic industry, as manufacturers may face less incentive to improve their products or reduce costs.

It's important to note that while these quotas may benefit domestic textile manufacturers and some workers in the short term, they can have negative consequences in the long run. Higher prices and reduced competition may hinder overall economic efficiency and consumer welfare. It's a trade-off between protecting domestic industries and allowing for the benefits of free trade and market competition.