3. Import quotasKazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, whereSK is the supply curve and Dk is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's governmentrestricts imports of apples to 200,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan'swelfare.On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as astraight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) toindicate the new price of apples with a quota of 200,000 apples.PRICE (Dollars per ton)10009008007006005004003002001000050100SKKW150 200 250 300 350 400 450 500QUANTITY (Thousands of tons)$SK+QPrice with QuotaAChange in PSQuota RentsDWL In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus(PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quotarents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota's consumption and protective effects.The equivalent import tariff for Kazakhstan's apple import quota isper ton of apples.If Kazakhstan's government auctions off the quota licenses in a well-organized, competitive auction, Kazakhstan experiences a deadweight loss of. (Hint: Select a shaded region to see its area. Be sure to adjust for the units on the quantity axis.)$

Deadweight loss implies the loss of economic efficiency that occurs when the equilibrium of a market…

3. Import quotas Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where SK is the supply curve and Dk is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government restricts imports of apples to 200,000 tons. The world price of apples 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 apples with a quota of 200,000 apples. 1000 900 SK ?

3. Import quotas Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where SK is the supply curve and Dk is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government restricts imports of apples to 200,000 tons. The world price of apples 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 apples with a quota of 200,000 apples. 1000 900 SK ?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3. Import quotas
Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where
SK is the supply curve and Dk is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government
restricts imports of apples to 200,000 tons. The world price of apples 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 apples with a quota of 200,000 apples.
PRICE (Dollars per ton)
1000
900
800
700
600
500
400
300
200
100
0
0
50
100
SK
K
W
150 200 250 300 350 400 450 500
QUANTITY (Thousands of tons)
$
SK+Q
Price with Quota
A
Change in PS
Quota Rents
DWL

In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus
(PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quota
rents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota's consumption and protective effects.
The equivalent import tariff for Kazakhstan's apple import quota is
per ton of apples.
If Kazakhstan's government auctions off the quota licenses in a well-organized, competitive auction, Kazakhstan experiences a deadweight loss of
. (Hint: Select a shaded region to see its area. Be sure to adjust for the units on the quantity axis.)
$

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