What is considered a potential disadvantage of trade quotas?

Trade quotas are limits set by governments on the amount of specific goods that can be imported into a country during a given time period. One of the key potential disadvantages of trade quotas is that they can lead to higher prices for consumers. This happens because when the quantity of a good that can be imported is restricted, the supply for that good in the domestic market decreases. With a limited supply and unchanged demand, sellers often raise prices, resulting in higher costs for consumers.

In contrast, encouraging competition, increasing variety for consumers, and stabilizing employment levels are generally considered benefits or positive outcomes of trade policies rather than disadvantages. For instance, by allowing more competition, a market can benefit from innovations and lower prices. Additionally, quotas might have complex effects on employment and variety that do not directly highlight disadvantages in the same way price increases do. Thus, the impact of trade quotas primarily manifests in costlier goods resulting from limited competition in the market.