Which of the following statements is true about import quotas?

Question

Quizplus · Accepted Answer

Import quotas limit the amount of imports entering a country, thereby reducing competition for domestic producers of similar goods. This advantage allows domestic producers to charge higher prices, resulting in higher profits.

Answer: C 
 Countries that implement import quotas often apply higher tariff rates to imports that exceed the quotas. This encourages domestic producers to increase production levels, which helps the country to become more self-sufficient and less dependent on imports.

Answer: D 
 Import quotas restrict the supply of imported goods, which increases the domestic price of those goods. This decreased supply may lead to higher demand for domestically produced goods, which could lead to lower domestic prices for those goods. This benefit occurs only if the domestic producers are not able to charge higher prices due to the reduced competition from imported goods.

Option E is incorrect as import quotas are implemented to limit foreign imports, not to help foreign producers gain a competitive advantage.

Which of the Following Statements Is True About Import Quotas