
Figure 3.10 The Effects of a Quota
In the free market for tattoos in River City, producers supply 1,500 tattoos per year at a price of $50 per tattoo at the equilibrium (point
x). Consumer surplus is
A +
B +
C, and producer surplus is
D +
E +
F. After the mayor of River City enacts a law requiring a permit to get a tattoo, the supply for tattoos becomes vertical at the quantity of 500 tattoos. At the new equilibrium (point
z), producers supply 500 tattoos at the increased price of $100 per tattoo. Consumer surplus is reduced to
A. Producer surplus is
B +
D +
F, and the net gain to producers is
B –
E. The deadweight loss is
C +
E.