A quota is a restriction on the quantity of a good that can be imported into a country. It limits the amount of foreign competition that domestic producers face and protects them from being overwhelmed by foreign goods. Quotas do not necessarily contribute to the revenue flow of the domestic or foreign government, nor do they eliminate producer surplus (in fact, they may increase it in some cases).

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Quotas

Question 37

Multiple Choice

Quotas:

A) Is a restriction on the quantity of a good that can be imported into a country
B) Contributes to the revenue flow of the domestic government
C) Contributes to the revenue flow of the foreign government
D) Contributes to the elimination of the producer surplus

Correct Answer: