The welfare effects of quotas depend,to some extent,on who has the right to import the quota restricted goods.

Question

Quizplus · Accepted Answer

If the right to import the quota restricted goods is given to domestic producers, they will benefit from reduced competition and higher prices, while consumers will face higher prices and less variety. On the other hand, if import licenses are auctioned or distributed through a lottery, some of the quota rents may be captured by the government or by lucky importers, which could have different distributional effects. Therefore, the welfare effects of quotas depend on who gets the import licenses, and whether they have market power or not.

The Welfare Effects of Quotas Depend,to Some Extent,on Who Has