ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The U.S. stops trade with China.
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The U.S. limits the amount of foreign cars brought into our country.
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The U.S. pays a high tax on BMW cars brought into the country.
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The president Veto’s a bill to stop trade in Africa.
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Detailed explanation-1: -An import quota is a limit on the amount of imports that can be brought into a particular country. For example, the US may limit the number of Japanese car imports to 2 million per year.
Detailed explanation-2: -What are some examples of quotas? The United States does not currently have any absolute quotas, but it has many tariff quotas that increase tariffs on a good once its import quota is met. Some items under a tariff rate quota in the United States include tuna, olives, and ethyl alcohol.
Detailed explanation-3: -A quota is a limit on trade, usually imports. They remain reasonably common in agricultural goods (for example, the US constrains imports of dairy goods, sugar, meats, and other foods).
Detailed explanation-4: -An import quota is a limit on the total quantity of imports that can be brought into a country in a given time period. It is a non-tariff barrier. A quota restricts supply leading to higher prices. For example China has a quota on Cambodian rice exports of 300, 000 tonnes per year.
Detailed explanation-5: -The import quota reduces the supply of imports. This reduces the overall natural supply of goods in the domestic country and causes prices to rise above what many other countries may pay for a good where there are no artificially imposed limits on goods.