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

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

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 trade
price was at $6. Graphs for Home market and International market are as below:
Price
Home market
Price
International market
18
8.
4
M
2 4 5 6 8 Quantity
Import
1. 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 S
change in producer surplus will be $
quota rents earned at Home will be $
and net effect on Home total
welfare 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 S
quota rents earned at Home will be $
and net effect on Home total
welfare 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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