The cost of lobbying for an import quota in a perfectly competitive market
A) increases the welfare loss of the quota.
B) decreases the deadweight loss of the quota.
C) shifts the supply curve of the good to the left.
D) increases the consumer surplus.

Question

Quizplus · Accepted Answer

Lobbying for an import quota involves spending money to influence policymakers to implement the quota. This cost is typically borne by the domestic producers and is a form of rent-seeking behavior, which increases the welfare loss of the quota. The quota itself reduces consumer surplus by raising the price of the imported good, and the cost of lobbying exacerbates this effect. Therefore, option A is correct. Option B is incorrect because the deadweight loss of a quota is always positive in a perfectly competitive market. Option C is also incorrect because the supply curve of the good is fixed in the short run, and a quota does not shift it. Option D is incorrect because the consumer surplus decreases due to the quota, regardless of lobbying costs.

The Cost of Lobbying for an Import Quota in a Perfectly