On the previous graph, use the purple line (diamond symbol) to indicate the new U.S. price under the quota.Under the quota, the price of towels is squantity demanded by U.S. consumers isthe quantity supplied by U.S. producers ismillion towels.Compared to conditions under free trade, U.S. manufacturers sellquota, while U.S. consumers buytowels and paymillion towels, and thetowels and receiveprice after the imposition of the towel quota.price after the imposition of the towelSupporters of the towel quota over free trade argue that the trade restriction will save jobs in the United States. What are the potential pitfalls of suchan argument? Check all that apply.Consumers will likely divert large amounts of scarce resources toward lobbying for the removal of the quota.The costs to domestic towel consumers may outweigh the benefits of jobs saved in the towel industry.China may retaliate, imposing restrictions on exports from the United States, thereby generating unemployment in U.S. exportindustries.Trade restrictions simply reshuffle jobs by increasing employment in the protected industry and reducing employment in other industries. 7. Effect of quotas on local consumers and producersThe following graph shows the U.S. domestic market for towels.PRICE (Dollars)20181614୯1210bo4200Domestic Demand12Domestic Supply2436QUANTITY (Millions of towels)4860In the absence of foreign trade, the equilibrium price of a towel is sdomestic quantity supplied equalmillion towels.Price (World)Price(Quota). At this price, both the domestic quantity demanded and theSuppose that trade between the United States and China is open and that the United States initially imposes no tariffs or quotas on towels importedfrom China. Assume that China has a comparative advantage in producing towels and charges the world price of $6 per towell. (Note: Throughout theproblem, assume that the amount demanded by any one country does not affect the world price of towels.)On the previous graph, use the grey line (star symbol) to indicate the world price of towels.At the world price of $6 per towel, the quantity of towels demanded by U.S. buyers ismanufacturers ismillion towels, and the quantity of towels imported from China ismillion towels, the quantity of towels supplied by U.S.million towels.Suppose now that the United States places a quota on imports of towels from China, which limits imports of Chinese towels to 12 million. (Hint: Theoriginal domestic supply curve represents domestic production only.)

Free trade is the unrestricted importing and exporting of goods and services between countries. A…

In the absence of foreign trade, the equilibrium price of a towel is domestic quantity supplied equal million towels. . At this price, both the domestic quantity demanded and the Suppose that trade between the United States and China is open and that the United States initially imposes no tariffs or quotas on towels imported from China. Assume that China has a comparative advantage in producing towels and charges the world price of $6 per towel. (Note: Throughout the problem, assume that the amount demanded by any one country does not affect the world price of towels.) On the previous graph, use the grey line (star symbol) to indicate the world price of towels. At the world price of $6 per towel, the quantity of towels demanded by U.S. buyers is manufacturers is million towels, the quantity of towels supplied by U.S. million towels. million towels, and the quantity of towels imported from China is

In the absence of foreign trade, the equilibrium price of a towel is domestic quantity supplied equal million towels. . At this price, both the domestic quantity demanded and the Suppose that trade between the United States and China is open and that the United States initially imposes no tariffs or quotas on towels imported from China. Assume that China has a comparative advantage in producing towels and charges the world price of $6 per towel. (Note: Throughout the problem, assume that the amount demanded by any one country does not affect the world price of towels.) On the previous graph, use the grey line (star symbol) to indicate the world price of towels. At the world price of $6 per towel, the quantity of towels demanded by U.S. buyers is manufacturers is million towels, the quantity of towels supplied by U.S. million towels. million towels, and the quantity of towels imported from China is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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