Impact of import quotas

Question 1

Domestic output (GDP)

Answer 1

Increases-Higher prices make it more profitable for domestic suppliers to enter the market

Question 2

Domestic demand

Answer 2

Contracts-The quota reduces the quantity of cheaper imports available and raises prices

Question 3

Import volumes

Answer 3

Contracts-Reduction in quantity depends on how severe the import cap is in each period.

Question 4

Tax revenues

Answer 4

No direct gains-However higher GDP might increase some tax revenues

Question 5

Domestic producer revenue

Answer 5

Increases-Selling an increased output at higher prices their revenue and producer surplus

Question 6

Foreign producer revenue

Answer 6

Falls-Import quota caps how much can be exported into the protected market

Question 7

Consumer surplus

Answer 7

Falls-Higher prices reduces consumer prices

Question 8

Overall economic welfare

Answer 8

Falls-Quota restricts free trade and therefore leads to deadweight loss of economic welfare.