A quota on imports is best described as:

• A. A limit on imports that reduces domestic prices.
• B. A limit on imports that raises domestic prices and protects producers.
• C. A tax on imports that lowers consumer prices.
• D. A policy that increases the supply of imported goods.

Answer: (B)

A quota is a numerical limit on how much of a good can be imported. By restricting the quantity available from abroad, imports become more scarce in the domestic market. With fewer foreign competitors, domestic producers can charge higher prices or sell more at higher prices, which protects them from foreign competition and improves their profitability. This policy is a protectionist tool aimed at supporting domestic industries.

It’s not a tax on imports, which would raise government revenue and also push up prices, nor is it a measure intended to increase the supply of imported goods.