Question

A quota operates by:

Options

• Banning the export of domestically produced goods

• Fixing minimum prices at which domestic goods must be sold

• Taxing imports so that they become costlier than domestic goods

• Placing a limit on the quantity of goods that can be imported

Answer 1

A quota is a limit placed on the quantity of goods that can be imported. Unlike a tariff, which works through price by taxing imports, a quota works directly on the volume of imports permitted into the country.