Question

An import quota is a A) tax on import quantities above the legal limit. B) way to increase tariff revenues for the exporting country. C) legal limit on the amount of a good that can be imported into a country. D) legal incentive for members of WTO to increase their exports of a good or service.

Answer 1

An import quota is C) a legal limit on the amount of a good that can be imported into a country. This differs from a tariff which is a A) tax on import quantities above the legal limit, or at all levels. 

Answer 2

C) legal limit on the amount of a good that can be imported into a country.

As a trade restriction, an import quota establishes a physical limit of the quantities (or the value) of a product or good that can be imported from foreign countries in a given period of time.

Some of its purposes are to protect domestic industries by restricting foreign competition, to direct the foreign exchange resources of the country for more high-priority import items, to reduce the balance of payments deficit faced by the country that exports the product, among others.