Suppose Home is a small country and instead of a tariff, Home applies an import quota limiting the amount foreign can sell to 2 units. The free tradeprice was at $6. Graphs for Home market and International market are as below:PriceHome marketPriceInternational market188.4M2 4 5 6 8 QuantityImport1. With import quota, the new price that consumers need to pay become $2. If the quota licenses are allocated to domestic producers, comparing with free trade, change in consumer surplus will be Schange in producer surplus will be $quota rents earned at Home will be $and net effect on Home totalwelfare will be $(Please use the negative sign if there is a decrease in welfare)3. If the quota license are given to the foreign exporters, comparing with free trade, change in consumer surplus will be $change in producer surplus will be Squota rents earned at Home will be $and net effect on Home totalwelfare will be $(Please use the negative sign if there is a decrease in welfare)4. With an import quota of 2 units the net effect on Home welfare is equivalent to that of a tariff of $

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Suppose Home is a small country and instead of a tariff, Home applies an import quota limiting the amount foreign can sell to 2 units. price was at $6. Graphs for Home market and International market are as below: Price Home market Price International market 18 9. 8. 4 D 2 45 6 8 Quantity Import

Suppose Home is a small country and instead of a tariff, Home applies an import quota limiting the amount foreign can sell to 2 units. price was at $6. Graphs for Home market and International market are as below: Price Home market Price International market 18 9. 8. 4 D 2 45 6 8 Quantity Import

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 3 3A. Construct a market for cotton imported into the U.S. with an equilibrium price of $1/bale and a quantity exchanged of 100 million bales. 3B. Illustrate the effect on the market for cotton imported into the if the U.S. if the federal government imposes an import quota at 50 million bales.
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