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What is the difference between tariffs and quotas?

A:

Quick Answer

According to Investopedia, a tariff is a tax placed on imported goods, while a quota limits the amount of a good that can be imported over a specified period of time. The price typically increases under both a tariff and a quota.

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What is the difference between tariffs and quotas?
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Full Answer

Since a tariff increases the cost of a foreign-made good, similar goods made by domestic companies also increase in price, according to Investopedia. Similarly, a quota increases prices by limiting the total supply of a particular good. A tariff-rate quota can be used when a tariff is set so high as to price a foreign good out of the domestic market, according to the World Trade Organization.

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