The home country government can confiscate the revenue effect of an import quota if ?
Correct answer: B. quota licenses are auctioned to the highest bidding importing company
- A. quota licenses are given to foreign exporting companies
- B. quota licenses are auctioned to the highest bidding importing company
- C. if quota licenses are given to domestic consumers of the good
- D. Both A and C
Explanation
Quota restrictions create quota rents because importers can buy goods at the lower world price and sell them at the higher domestic price. Auctioning the licenses lets the home government capture this revenue.
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