Question

what do quotas and embargoes have in common?
they both tend to raise prices.
they both affect imports from certain countries.
they both set limits on imported goods.
they both frequently result in domestic shortages.

Explanation:

• Quotas: These are quantitative limits on the amount of a good that can be imported. For example, a country might say "only 10,000 tons of steel can be imported from Country X in a year".
• Embargoes: These are bans on trade with a particular country. For instance, a country might embargo all imports from Country Y (a complete halt of imports).
• Analysis of options:
• Option 1: Quotas can raise prices (less supply in the domestic market due to limited imports can drive up prices), but embargoes (if a country was not importing much from the embargoed country anyway) may not have a significant price - raising effect.
• Option 2: Quotas can be set for imports from any source (not necessarily certain countries. A quota could be a global quota, e.g., "only 100,000 cars can be imported from all countries combined"), while embargoes are specifically on imports from certain countries.
• Option 3: Quotas set a numerical limit on imported goods. Embargoes set a limit of zero (a complete limit) on imports from the embargoed country. So, both set limits on imported goods.
• Option 4: Quotas may not always result in domestic shortages if domestic producers can increase supply or if there are substitutes. Embargoes (if the embargoed goods were a small part of imports) may also not cause shortages.

Answer:

They both set limits on imported goods.