3. Import quotas Kazakhstan is a grape producer, as well as an importer of grapes. Suppose the following graph shows Kazakhstan's domestic market for grapes, where Sx is the supply curve and Dx is the demand curve. The free trade world price of grapes (Pw) is $800 per ton. Suppose Kazakhstan's government restricts imports of grapes to 120,000 tons. The world price of grapes is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 120,000 grapes. PRICE (Dollars per ton) 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0 0 40 SK DK Pw W ‒‒‒ 80 120 160 200 240 280 320 360 400 QUANTITY (Thousands of tons) SK+Q Price with Quota A Change in PS Quota Rents DWL ?

3. Import quotas Kazakhstan is a grape producer, as well as an importer of grapes. Suppose the following graph shows Kazakhstan's domestic market for grapes, where Sx is the supply curve and Dx is the demand curve. The free trade world price of grapes (Pw) is $800 per ton. Suppose Kazakhstan's government restricts imports of grapes to 120,000 tons. The world price of grapes is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of grapes with a quota of 120,000 grapes. PRICE (Dollars per ton) 4000 3600 3200 2800 2400 2000 1600 1200 800 400 0 0 40 SK DK Pw W ‒‒‒ 80 120 160 200 240 280 320 360 400 QUANTITY (Thousands of tons) SK+Q Price with Quota A Change in PS Quota Rents DWL ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When a tariff is imposed on a good, the price to consumers _____ and the amount imported _____.
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