Final answer:
Tariffs and quotas can protect domestic jobs, but they often lead to increased consumer prices and only part of this cost aids in job preservation. The economy also loses out on the efficiency gains from specialization, resulting in a deadweight loss.
Step-by-step explanation:
When a government imposes tariffs or quotas on imports, the intention is often to protect domestic jobs. However, this effort at protectionism can be expensive and inefficient. For instance, suppose tariffs are applied to steel imports; this results in higher prices, which lead to increased profits for U.S. steel companies. The companies might use these profits to invest in new equipment, pay higher managerial bonuses, and raise salaries for existing employees, all while possibly avoiding layoffs. Nonetheless, only a portion of the price increase actually contributes to job preservation.
Beyond the direct effects, such protectionism causes the economy to forfeit the benefits of focusing on industries where it has a comparative advantage, or areas in which it is most efficient at producing. This translates to a loss in economic efficiency, known as deadweight loss, reflecting the cost not just in higher prices but lost opportunities for more efficient output.