CA Foundation · Business Economics · International Trade
Which of the following is most likely to be a quota-based trade restriction rather than a subsidy?
A limit of 2 lakh units on imported mobile phones in a year is a quota, because it caps the physical quantity imported. Cash payments, cheap credit and tax rebates to exporters are financial assistance, so they are subsidies, not quotas.
- ACash payment to farmers for each tonne of wheat exported
- BLimit of 2 lakh units on imported mobile phones in a yearCorrect
- CLow-interest credit offered to exporters of handicrafts
- DTax rebate given to exporters on goods shipped abroad
Explanation
A quota sets a physical limit on the quantity traded, as in the 2 lakh unit cap on imported phones. The other three options are forms of financial assistance to producers or exporters, which are subsidies and incentives.
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