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Suppose that the United States limits sugar imports by using a quota and that the quota is enforced by giving import licenses to foreign countries. Further suppose that the U.S. is a small country in the world sugar market, that the estimated production distortion due to the policy is $30, and the estimated consumption distortion is $50.

Suppose that the United States limits sugar imports by using a quota and that the quota is enforced by giving import licenses to foreign countries. Further suppose that the U.S. is a small country in the world sugar market, that the estimated production distortion due to the policy is $30, and the estimated consumption distortion is $50.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Suppose that the United States limits sugar imports by using a quota and that the quota is enforced by giving import licenses to foreign countries. Further suppose that the U.S. is a small country in the world sugar market, that the estimated production distortion due to the policy is $30, and the estimated consumption distortion is $50. Finally, suppose that the collective value of the import licenses are estimated to be $130. What is the dollar value of the change in U.S. social welfare (compared with free trade) that can be attributed to this policy? If you think that social welfare falls, use a negative sign in your answer. Your Answer: Answer
Transcribed Image Text:Suppose that the United States limits sugar imports by using a quota and that the quota is enforced by giving import licenses to foreign countries. Further suppose that the U.S. is a small country in the world sugar market, that the estimated production distortion due to the policy is $30, and the estimated consumption distortion is $50. Finally, suppose that the collective value of the import licenses are estimated to be $130. What is the dollar value of the change in U.S. social welfare (compared with free trade) that can be attributed to this policy? If you think that social welfare falls, use a negative sign in your answer. Your Answer: Answer
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