Economics And Environmental Conservation Practice Test

What term refers to a limit on the amount of a good that can be imported?

Tariffs Quota Subsidy Trade Wars

Correct Answer:

Quota

Explanation:

The concept being tested is a quota. A quota is a hard cap on the quantity of a good that can be imported during a set period, meaning imports cannot exceed that limit regardless of price. This directly reduces foreign supply and tends to raise domestic prices to protect local producers. Licenses to import under a quota are often allocated or traded, creating potential rents for license holders. By contrast, tariffs raise the price of imports through a tax (without a fixed quantity limit), subsidies involve payments to domestic or foreign producers, and trade wars refer to a broad strategy of escalating barriers rather than a single limit on quantity.

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