The Effects of an Import Quota under Competitive Conditions
(Figure 9.2) Welfare Effects

We can show the welfare effects of the quota on the graphs above. Area a is redistributed from consumer surplus to producer surplus. Areas b+d are deadweight losses. Area c is the revenue effect which is redistributed to whoever commands the import licenses. If government turns over revenue from selling import licenses to the same groups who would have received the tariff revenue in Key Graph 2 (Figure 8.4), then the quota will have the same effects on everyone. Net national losses will be b+d. Click on the highlighted text in this paragraph in order to show the areas in the graph above. You can click the reset button to clear the graph. Click continue when you are ready to move on to the next page.