Critical Thinking: Costs and Benefits of Import Quotas (100 Points) In 1980, automobile manufacturers in the United States asserted that import quotas be instituted on foreign-produced vehicles...

COSTS AND BENEFITS OF QUOTAS 1
Costs and Benefits of Import Quotas
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Introduction
One of the most contentious issues in the international trade is protectionism. As a result of the increased number of multinational organization, local industries have come under threat of extinction. Most multinational organization is big in terms of revenue and size. They have a lot of resources. On the other hand, most local industries are relatively smaller in size. They are not able to compete favorably with the multinational. As a result, they are suppressed and their performance is literally dominated. This has a negative effect on the national economy. It is an issue that is not only likely to slow the economic growth of the host company but will increase the level of unemployment. For this reason, governments have been looking for the best ways in which they can protect the local industries (Kegley & Blanton, 2017). There are two commonly used tools namely tariffs and quotas. A tariff is basically a tax whose effect is to increase the cost of imported good hence making them relatively expensive as compared to the locally produced goods. The idea is to discourage residents from buying these goods and instead go for the local commodities. On the other hand, a quota is a limit that is put by a government on the amount or volume of goods that can be imported. The limit could either be in terms of percentage of sale or the number of units imported. The United States of America asserted import quotas on the automobile industry in the year 1980 with the objective of reducing the number of vehicles produced in other nations in the U.S. market. This paper explores the costs and benefits of this quota to the US economy.
Effects of quotas
When the government implements limits to the number of units of a certain commodity being imported from the foreign market, it means that the supply of such products will be reduced. As the law of demand of supply states, when the supply is low, the price of the commodity increases. Therefore, when the United States asserted quotas on imported vehicles, their supply reduced and consequently their prices increased (Kegley & Blanton, 2017). As such, customers were required to pay more money on imported vehicles. Technically, the quotas limited local customers from buying imported...