Quotas are...

Quotas are...

• A. Limits on the number of imports and exports
• B. Taxes on imports and exports
• C. A government grant to promote exports
• D. A requirement for export licenses

Answer: (A)

Quotas are a quantitative restriction that caps the amount of a good that can be imported or exported within a given period. By setting a maximum volume, they directly constrain trade flow and can push up prices to protect domestic producers. This differs from a tariff, which taxes imports to discourage them without imposing a strict ceiling on quantity. It’s not a government grant to promote exports, which would be a subsidy, nor is it merely an export licensing requirement, which regulates permission but doesn’t by itself cap total trade. A typical example is a country limiting imports of a commodity to a certain number of tons per year.

Quotas are a quantitative restriction that caps the amount of a good that can be imported or exported within a given period. By setting a maximum volume, they directly constrain trade flow and can push up prices to protect domestic producers. This differs from a tariff, which taxes imports to discourage them without imposing a strict ceiling on quantity. It’s not a government grant to promote exports, which would be a subsidy, nor is it merely an export licensing requirement, which regulates permission but doesn’t by itself cap total trade. A typical example is a country limiting imports of a commodity to a certain number of tons per year.