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22 November, 18:41

Domestic producers experience limited import competition when a VER is in place. As a result, these producers make extra profit because supply is artificially limited by the import quota. This extra profit is called:

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  1. 22 November, 20:33
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    Quota rent

    Explanation:

    When voluntary export restraints (VER) are set up and / or import quotas are enforced, the extra profit that domestic producers make because the supply is artificially limited is called quota rent. Quota rents are a type of economic inefficiency since they produce more losses than benefits. Society as a whole generally losses while a group of favored companies make huge profits.

    For example, sugar imports are limited in the US, so domestic sugar producers are able to sell sugar at much higher prices than regular international prices. That artificial extra profit earned by sugar companies in the US can be classified as quota rent.
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