A question about import quota and VER

Hi! There is a question on Schweser notes asking the least likely result of import quotas and voluntary export restraint. The choices are:

a) increased revenue for the government

b) a decrease in the quantity of imports of the product

c) a shift in production toward higher-cost suppliers.

The correct answer is A.

Could someone explain the answer to me? Why is answer c a likely result of import quotas and VER and What does higher-cost supplier mean anyways?

And why does VER decreases the quantity of import of the product given VER’s goal is to restrict the amount of a good exported? (I just don’t understand how restricting the amount of a good A to be exported decreases the quantity of imports of product A? Is it because if there is not many product A exported, there should be enough A in the domestic market so that no import is needed?)

Thx in advance!



“Higher-cost supplier” means . . . suppliers with higher costs (e.g., higher wage rates).

VER doesn’t decrease the import quantity; import quotas do. And import quotas shift production toward higher-cost (domestic) suppliers. (We don’t know for certain that domestic suppliers have higher costs, but there’s some reason that we’re importing; it may be that imported goods are less expensive, or it may be that domestic goods are inferior. However, higher-cost domestic suppliers is a likely possibility.)

You’re welcome in arrears.

I c. So why is Voluntary Export Constraint mentionned in the question…It seems all the choices have nothing to do with it.

Two obvious possibilities leap to mind:

  1. VER was included as distractor information (fairly common): some candidates might think that it would eliminate one or more of the answer choices.
  2. The author of the question is an idiot.

I’ll leave it to you to decide which is the more likely explanation.