The effects of an import quota are similar to those of a tariff. The price rises, the quantity bought decreases, and the quantity produced in the United States increases. Figure 9.7 illustrates the effects.

With free trade, in part (a), Americans buy 60 million T-shirts at the world price. The United States produces 20 million T-shirts and 1 imports 40 million T-shirts. In part (b), 2 with an import quota of 10 million Tshirts, the U.S. supply curve becomes S + quota. 3 The price rises to $7 a T-shirt. Domestic production increases, purchases decrease, and 4 the quantity imported decreases.



US