How do quotas function in international trade?

Quotas are a key tool in international trade, and they serve the specific purpose of restricting the volume of certain goods that can be imported or exported over a set period. This limitation is established by governments to manage trade levels, support domestic industries, or protect national interests. By controlling the amount of foreign goods entering a market, quotas can help ensure that local businesses remain competitive and that the domestic economy is safeguarded from potential negative impacts of excessive foreign competition.

In contrast, the other options do not accurately reflect how quotas function. Increasing tariffs relates to pricing rather than volume control, allowing for unlimited trade contradicts the very definition of a quota, and granting subsidies is a different measure entirely meant to support or promote domestic producers, rather than directly controlling trade volumes. Therefore, option B precisely captures the essence and operational mechanism of quotas in the realm of international trade.