On January 1, 2005, quotas on clothing imports to the United States first instituted in the 1960s to protect the garment industry in the United States were eliminated. What was the likely effect on profits of foreign companies that sold clothing in the American market? The short-run effect of the quota removal is that profits decreased because equilibrium price decreased . If economies of scale exist and average total costs fall by more than the fall in equilibrium price, in the long run profits might increase with the removal of the quotas