An import quota or tariff on French wine that raises the prices for wine will probably:

• A. have no effect on consumer behavior
• B. decrease the demand for domestic wine
• C. encourage the development of a black market for French wine
• D. lead to a surplus of French wine in the domestic market

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the economic effect of an import quota or tariff. Both policies increase the price of imported goods—in this case, French wine—by limiting supply or adding a cost to imports.
2. Step 2: Analyze consumer behavior in response to higher prices. When the price of French wine rises, consumers may reduce their quantity demanded of French wine or seek alternatives.
3. Step 3: Consider the impact on domestic wine demand. Higher prices for French wine can make domestic wine relatively cheaper, potentially increasing its demand rather than decreasing it.
4. Step 4: Evaluate the possibility of a black market. If consumers strongly prefer French wine but face higher prices or limited availability, some may turn to illegal channels to obtain it, encouraging a black market.
5. Step 5: Assess the likelihood of a surplus. Since the quota or tariff restricts imports, it is unlikely to cause a surplus of French wine domestically; instead, it reduces supply and raises prices.