Consider the market for steel illustrated in the graph to the right, which initially has no quota limiting the amount of steel imported. What effect does a U.S. quota on steel of Q>0 have on the equilibrium in the U.S. steel market? (Hint: The answer depends on whether the quota binds: is low enough to affect the equilibrium.) Assume that at prices below p, the quota is non-binding, and that without a quota, domestic and foreign firms both are willing to supply steel. Assume that the foreign supply curve of steel is upward sloping. 1.) Use the line drawing tool to show how the market supply curve changes because of the quota. Label this line 'Squota 2.) Use the point drawing tool to indicate the equilibrium price and quantity with the quota. Label this point 'e quota Carefully follow the instructions above, and only draw the required objects. p, Price per unit of steel Q, Units of steel per year S D

Consider the market for steel illustrated in the graph to the right, which initially has no quota limiting the amount of steel imported. What effect does a U.S. quota on steel of Q>0 have on the equilibrium in the U.S. steel market? (Hint: The answer depends on whether the quota binds: is low enough to affect the equilibrium.) Assume that at prices below p, the quota is non-binding, and that without a quota, domestic and foreign firms both are willing to supply steel. Assume that the foreign supply curve of steel is upward sloping. 1.) Use the line drawing tool to show how the market supply curve changes because of the quota. Label this line 'Squota 2.) Use the point drawing tool to indicate the equilibrium price and quantity with the quota. Label this point 'e quota Carefully follow the instructions above, and only draw the required objects. p, Price per unit of steel Q, Units of steel per year S D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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