Question

Import quotas tend to lead to all of the following EXCEPT:

a) Higher prices for imported goods
b) Reduced consumer choice
c) Increased competition
d) Smuggling and black market activities

Answer 1

Import quotas lead to higher prices, reduced consumer choice, and smuggling, but do not lead to increased competition, which is what they explicitly do not cause. The correct option is c.

Step-by-step explanation:

Import quotas tend to lead to various consequences, but the option that they do NOT cause is increased competition. Instead, they typically lead to:

• Higher prices for imported goods due to limited supply.
• Reduced consumer choice because there are fewer products available from international sources.
• Smuggling and black market activities as individuals and organizations try to bypass the restrictions imposed by the quotas.

Import quotas serve as a form of protectionism, which can sometimes reduce domestic competition, allowing local producers to increase their prices and decrease their competitiveness, rather than increasing competition. High tariffs and import quotas are tools used to restrict trade and protect domestic industries.

Hence, Option c is correct.