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CFA Level 1
Economics

Implications of Quotas in International Trade

Very Hard International Economics International Trade

In the context of international trade, consider a hypothetical country, TradeLand, that imposes a strict quota on the amount of imported cars to protect its domestic automotive industry. As a result, TradeLand's domestic car manufacturers are guaranteed a market share, leading to an increase in their production levels. However, this policy can have broader implications for TradeLand's economy and its trade relationships.

Which of the following statements best describes one of the potential negative consequences of such a quota on TradeLand's economy?

Hint

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