An import quota increases domestic producer surplus and the surplus of import licence holders, reduces domestic consumer surplus, and creates deadweight loss.

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An import quota restricts the amount of a good that can be imported, which increases the price of the good and benefits domestic producers and import licence holders. However, it also reduces domestic consumer surplus because consumers are forced to pay a higher price for the good. The deadweight loss occurs because some potential gains from trade are lost when the quota restricts imports.

An Import Quota Increases Domestic Producer Surplus and the Surplus