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A-Level Economics · Import quota diagram question

What does an import quota actually do?

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The diagram

The answer

It caps imports at a fixed quantity — anything beyond that is banned. A quota is a fixed amount: allow 1,000 cars in, and the 1,000-and-first is banned. Here imports are allowed only from Q₁ to Q₃. A quota is a physical cap, not a tax. Imports are permitted only up to Q₁ → Q₃ (A to C on the world price line) and the rest are banned. The price effect follows from that restriction — it is never imposed directly.

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This is one of 6 questions on the import quota diagram — every corner lettered, every wrong answer diagnosed.

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