A production quota is a goal for the production of a good. It is typically set by a government or an organization, and can be applied to an individual worker, firm, industry or country. Quotas can be set high to encourage production, or can be used to restrict production to support a certain price level.
Quotas, like other trade restrictions, are typically used to benefit the producers of a good at the expense of consumers in that economy. Possible effects include corruption (bribes to increase a quota allocation) or smuggling (concealed actions to exceed a quota). Quotas are considered to be less economically efficient than tariffs, which in turn are less economically efficient than free trade.
- Oil production by OPEC
- Common Agricultural Policy by the European Union
- A 10-percent increase in production quotas for construction workers triggered the Uprising of 1953 in East Germany.
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