What are quotas?

Quotas refer specifically to restrictions imposed on the quantity of goods that may be imported into a country. When a government establishes a quota, it sets a limit on the number of units or the total value of certain goods that can be brought into its borders during a specified timeframe. This policy is typically used to protect domestic industries from foreign competition by controlling the supply of imported products, thereby maintaining higher prices and enabling local producers to compete more effectively.

The other options do not accurately define quotas. Limits on the quality of goods exported or taxes on luxury items refer to different regulatory mechanisms. Incentives for businesses to increase production pertain to subsidies or other forms of support rather than quotas. Overall, understanding quotas is essential in discussions of international trade and economic policy, as they have significant implications for both local and global markets.