Q. Consider the following statements:
- A quota is a non-tariff barrier to trade
- Imposition of quota will result in increased price in the domestic market
- A quota is a restriction placed on the amount of a product allowed to enter or leave a country
Which among the above statements is / are correct?
Answer:
1, 2 & 3
Notes:
- True - A quota is considered a non-tariff trade barrier because it restricts the quantity of a good that can be imported or exported, rather than imposing a tariff or tax.
- True - By limiting import quantity, a quota reduces supply in the domestic market which leads to higher prices for the imported good.
- True - A quota directly restricts the amount of a product that can enter or leave a country over a given period of time.
All three statements are correct. A quota is a non-tariff barrier that limits import quantity, leading to higher domestic prices. It places direct restrictions on the flow of goods across borders. Therefore, the answer is D) 1, 2 & 3