Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

Question

Quizplus · Accepted Answer

Tariffs and quotas both increase the price of imported goods, reducing the quantity demanded and increasing the quantity supplied domestically. This leads to an inefficient allocation of resources and deadweight losses, resulting in a net loss for both the importing and exporting countries.

Tariffs and Quotas Cause Deadweight Losses Because They Raise the Price