A limit on the amount imported is known as what?

A limit on the amount imported is known as what?

• A. Tariffs
• B. Subsidy
• C. Quota
• D. Trade Wars

Answer: (C)

This item tests knowledge of trade policy tools that restrict imports. A limit on the quantity of goods that can be imported is called a quota. Quotas set a hard cap on how much can enter, so once the limit is reached, no additional imports can come in, regardless of price. Tariffs, by contrast, impose a tax on each unit of imports, which raises the cost and tends to reduce imports but does not explicitly cap the quantity. Subsidies are payments to domestic producers to help them compete with foreign goods. Trade wars describe broader confrontations where countries repeatedly raise barriers in response to others’ measures, rather than a single explicit limit. Quotas often raise domestic prices and can transfer rents to holders of the import licenses, since the limited supply becomes more valuable.

This item tests knowledge of trade policy tools that restrict imports. A limit on the quantity of goods that can be imported is called a quota. Quotas set a hard cap on how much can enter, so once the limit is reached, no additional imports can come in, regardless of price.

Tariffs, by contrast, impose a tax on each unit of imports, which raises the cost and tends to reduce imports but does not explicitly cap the quantity. Subsidies are payments to domestic producers to help them compete with foreign goods. Trade wars describe broader confrontations where countries repeatedly raise barriers in response to others’ measures, rather than a single explicit limit.

Quotas often raise domestic prices and can transfer rents to holders of the import licenses, since the limited supply becomes more valuable.