What does a quota do in trade policy?

A quota in trade policy specifically refers to a set limit on the quantity or monetary value of goods that can be imported or exported during a given time period. This regulatory measure is utilized by governments to control the amount of certain goods entering a country. Quotas can be used to protect domestic industries from foreign competition, manage the supply of goods, or influence trade balance.

The other options address related concepts but do not accurately reflect the definition or function of quotas. For instance, setting maximum tariffs pertains to the regulation of taxation on imports, which is a separate mechanism in trade policy focusing on the financial aspect rather than the quantity. Eliminating all trade restrictions is overly broad and not achievable through quotas, as these are inherently regulatory tools intended to impose limitations. Encouraging the export of low-demand goods is not the purpose of quotas; in fact, quotas usually relate more to ensuring that domestic markets are not flooded with foreign products rather than promoting goods that do not have strong market demand.