Which of the following describes the effect of quotas?

The correct choice highlights that quotas are trade restrictions that limit the quantity of a specific product that can be imported into a country. By setting a cap on imports, quotas serve to protect domestic producers from foreign competition. This protection allows domestic industries to maintain higher prices and potentially increase their market share since they face less competition from international manufacturers.

When a government imposes a quota, it aims to benefit local businesses by ensuring they can sell their products in a less competitive environment. While this can foster growth in domestic industries, it can also lead to higher prices for consumers, as the limited supply of imported goods may reduce overall choices and increase prices.

The other options reflect different aspects of market dynamics that do not align with the impact of quotas. For instance, quotas do not typically increase competition in the market; they often have the opposite effect. They certainly do not eliminate scarcity of goods since they can actually create shortages by limiting supply. Furthermore, while they might stabilize prices for domestic producers, they generally do not lead to lower prices for consumers.