Under what condition can the government of the importing country capture the revenue generated by an import quota?

Show Answers

If quota permits are allocated to foreign exportersIf quota permits are sold through an auction to the importing firms willing to pay the mostIf quota permits are distributed to local consumers of the productIf quota permits are assigned both to foreign exporters and local consumersIf quota permits are given freely to all importers

Explanation

The government can appropriate the revenue effect of an import quota when it auctions quota licenses to the highest bidding importers. Allocating licenses to foreign exporters or domestic consumers does not allow the government to capture this revenue.