When imports are restricted with quota rather than a tariff, the cost is sometimes magnified by a process known as _______.

Correct option is A

Correct Answer: A. Rent seeking.
Explanation:

• When a government imposes an import quota, it creates a limit on the quantity of goods that can be imported. This scarcity drives the domestic price above the world price, creating a potential profit known as "quota rent" for whoever holds the license to import.
  
• The cost to society is magnified because individuals or firms compete to capture these valuable rents. This competition involves using productive resources for non-productive activities—such as lobbying, legal battles, or even bribery—to secure import licenses.
• This activity is called Rent Seeking. Since these resources are diverted from productive use merely to transfer wealth, they represent a net loss to society (waste), essentially adding the value of the rents to the standard deadweight loss of protectionism.
  

Information Booster:

• Anne Krueger: The term was popularized in this context by economist Anne Krueger in her seminal 1974 paper "The Political Economy of the Rent-Seeking Society". She estimated that rent-seeking costs could be a significant percentage of a country's GDP (e.g., 7.3% in India in 1964).
  
• Tariff vs. Quota: With a tariff, the "wedge" between prices becomes government revenue (a transfer). With a quota, if rent-seeking is perfectly competitive, that entire value can be dissipated (wasted) in the effort to get the license, making quotas potentially more costly than equivalent tariffs.
  

Additional Information:

• (B) Quota seeking: This is not the standard economic term. The behavior of seeking the quota rights is subsumed under "rent seeking".