What potential issue can arise from quotas on imports?

Imposing quotas on imports can lead to black market activity because these restrictions limit the amount of a particular good that can legally enter a country. When legal avenues for purchasing certain goods are restricted, consumers or businesses may seek alternative ways to obtain those goods, often turning to illegal markets where the products can be sold without the constraints of government regulations.

In such scenarios, the demand for the restricted goods remains strong, and the existence of a quota can create an incentive for individuals or groups to circumvent the law, leading to the formation of a black market. This not only undermines the effectiveness of the quota in controlling imports but can also result in loss of government revenue from taxes and contribute to unsafe or unregulated products entering the market.

Thus, the presence of black market activity highlights the unintended consequences of import quotas, contrasting with other potential outcomes like increased imports or improved trade relations, which are less likely to occur during strict import restrictions.