What are quota rents?

Quota rents refer to the economic rent received by the holder of the right to import under a quota. When a government imposes a quota, it limits the quantity of a good that can be imported, effectively creating a scarcity of that good in the market. This scarcity drives up the price of the imported goods above the world market price.

The exclusive right to import goods under this quota allows those holders—often domestic producers or designated importers—to sell these goods at a higher price than they would in a free market. The difference between the world price and the higher market price represents the quota rent. It is a form of economic profit generated due to the controlled supply and can be seen as a benefit accrued by the quota holders.

Holding the import rights under a quota means that certain parties can capitalize on the limited availability of imports, resulting in these economic rents. This dynamic contrasts with the other options, which do not accurately capture the specific nature of quota rents within the economic framework of international trade.