A quota can potentially cause an even larger deadweight loss than a tariff.

Question

Quizplus · Accepted Answer

A quota is a restriction on the quantity of goods that can be imported, whereas a tariff is a tax imposed on imported goods. A quota can lead to shortages and higher prices, as well as inefficiencies in the allocation of resources. Additionally, a quota can lead to illegal activities such as smuggling, further increasing the costs and deadweight losses.

A Quota Can Potentially Cause an Even Larger Deadweight Loss