Quotas

• What is a quota in the context of imports?

  A quota is a physical limit on imports.
• Why did the UK extend their quota on steel imports in June 2022?

  To protect employment in the domestic steel industry.
• Where is the quota limit usually set in relation to the free market level of imports?

  Below the free market level of imports.
• What effect does a quota have on the market price of goods?

  A quota raises the market price.
• What potential issue can arise due to the limitation of cheaper imports by a quota?

  A quota may create shortages.
• How do domestic firms benefit from a quota on imports?

  They are able to supply more due to the lower level of imports.
• What is a potential outcome for employment in domestic firms due to a quota?

  It may increase the level of employment for domestic firms.
• What does imposing a cap on the volume of imports create?

  An artificial scarcity of the product
• What is the deadweight welfare loss associated with the imposition of a quota?

  It is the loss to the country because consumers buy less at a higher price
• How does the deadweight loss affect the world economy?

  There is also a deadweight loss to the world economy
• example of the EU imposing a quota in 2018?

  on Russian wood packaging
• example of the US imposing a quota in 2018?

  import quota on solar panels