Social and Behavioral Sciences Commons^™

In this article, a specific example is given to illustrate that rent seeking can raise welfare under full seeking in general equilibrium: an import quota is levied in the presence of domestic monopoly in the import competing industry. An import quota is considered instead of an import tariff since a tariff confers no market power on the local monopolist. The monopolist still faces a perfectly elastic demand, corresponding now to the world price plus tariff. The introduction of monopoly does not add another distortion to the economy, which is necessary if full rent seeking is to be welfare improving. But …