FIGURE 7 EFFECTS OF A QUOTA
imageWhat are the effects of a quota? They are similar to the effects of a tariff, except that the government restricts the quantity of imports into the country to 1,000 units. Imports fall to the quota level, and again consumers lose as they must pay higher prices for less output. Producers and their employees gain as prices and employment in the domestic industry rise. With a quota, however, the government does not collect revenues.