What is the function of an import quota?

An import quota specifically serves to limit the amount of goods that can be brought into a country. By imposing a cap on the volume or value of certain products imported, the government aims to manage the quantity of foreign goods available in the domestic market. This restriction helps protect local industries from being overwhelmed by international competition, allowing domestic producers to maintain a foothold in the market.

Imposing an import quota can also relate to promoting a favorable trade balance. However, the primary and most direct function of an import quota is indeed the limitation of imports, ensuring that the local market remains sufficiently supplied by domestic producers without being flooded by foreign goods.

The other options, while they may touch on results that could be influenced by import quotas, do not capture the essence of what an import quota is designed to do. The aim is primarily focused on controlling the volume of imports rather than directly enhancing the trade balance, encouraging foreign investment, or solely increasing domestic production.