Quota Rent

A portion of the loss of consumer surplus caused by an import quota that is transferred to the foreign supplier as additional profits.

Suppose a quota is placed on women's blouses that are imported in the U.S. from Singapore. Before the quota was placed, the domestic price of blouses was U.S.$30 and 1 million blouses were imported while 500,000 were produced in the U.S. Now suppose after the quota is placed the price of a blouse became U.S.$35 and the amount of blouses supplied from Singapore became 500,000, but at the higher price more U.S. producers are able to provide more women's blouses. Specifically, now they produce 700,000 blouses.

That example shows that with the quota, there is a transfer of consumer surplus. Domestic consumers now pay more for each imported blouse and buy only 500,000 as opposed 1,000,000 imported blouses. The quota rent then is U.S.$2.5 million (500,000 x $5).