Consider the following information pertaining to a country's imports, consumption, andproduction of t-shirts following the removal of Multi Fiber Agreement (MFA) quotas:UnderAfterМFAМFAWorld Price ($/shirt)Domestic Price (S/shirt)Domestic Consumption (millions of shirts)Domestic Production (millions of shirts)2.002.002.502.001001257550a. Use the information in the table above to graph the effects of the quota removalon domestic consumption and production. Include a companion graph for theworld market like that shown in class.b. The deadweight loss associated with the quota is:c. The quota rents that were earned under the quota are:d. The gain in consumer surplus associated with quota removal is:e. The loss in producer surplus from the removal of the quota is:f. Assuming that the foreign government assigned the quota licenses, the amountthe home country gained from removal of the quota is:4.

(b) The deadweight loss associated with the quota = B+D(c) The quota rents that were earned under…

The deadweight loss associated with the quota is: The quota rents that were earned under the quota are: The gain in consumer surplus associated with quota removal is: The loss in producer surplus from the removal of the quota is:

The deadweight loss associated with the quota is: The quota rents that were earned under the quota are: The gain in consumer surplus associated with quota removal is: The loss in producer surplus from the removal of the quota 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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Question

Consider the following information pertaining to a country's imports, consumption, and
production of t-shirts following the removal of Multi Fiber Agreement (MFA) quotas:
Under
After
МFA
МFA
World Price ($/shirt)
Domestic Price (S/shirt)
Domestic Consumption (millions of shirts)
Domestic Production (millions of shirts)
2.00
2.00
2.50
2.00
100
125
75
50
a. Use the information in the table above to graph the effects of the quota removal
on domestic consumption and production. Include a companion graph for the
world market like that shown in class.
b. The deadweight loss associated with the quota is:
c. The quota rents that were earned under the quota are:
d. The gain in consumer surplus associated with quota removal is:
e. The loss in producer surplus from the removal of the quota is:
f. Assuming that the foreign government assigned the quota licenses, the amount
the home country gained from removal of the quota is:
4.

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