The equilibrium price under an import quota is below the price that occurs with an import ban.

Question

Quizplus · Accepted Answer

An import quota restricts the amount of imports that can enter a country, but still allows some imports to enter. As a result, the limited supply of imports increases their price. However, the price increase is typically less than what occurs under a complete import ban, which eliminates all imports and creates a larger shortage. Thus, the equilibrium price under an import quota is generally lower than the price under an import ban.

The Equilibrium Price Under an Import Quota Is Below the Price