5. Import quotasThe following graph shows the U.S. domestic market for jackets.Use this graph to answer the questions that follow.2018Domestic SupplyDomestic Demand161412Domestic SupplyPrice(World)6.Domestic Demand4Price(Quota)20 8162432404856647280QUANTITY (Millions of jackets)With no trade, the equilibrium price of a jacket is $|. At this price, both the domestic quantity demanded and the domestic quantitysupplied equalmillion jackets.PRICE (Dollars) Suppose now that the United States trades with China but neither country can affect the world price of jackets. Initially, the United States does notuse any trade barriers (neither tariffs nor quotas) on jackets imported from China. Assume that China has a comparative advantage in producingjackets and charges the world price of $6 per jacket.On the graph, use the grey Iline (star symbol) to indicate the world price of jackets.At the world price of $6 per jacket, U.S. consumers will demandmillion jackets, U.S. manufacturers will supplymillionjackets, and the U.S. will importmillion jackets from China.Suppose now that the United States imposes a quota on imports of jackets from China, which limits imports of Chinese jackets to 16 million. (Hint:The original domestic supply curve represents domestic production only.)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 jackets is $per jacket, U.S. producers supplymillion jackets, and U.S. consumersdemandmillion jackets.Compared to conditions under free trade, U.S. manufacturers selljackets and receiveprice after the imposition of thejacket quota, while U.S. consumers buyv jackets and payprice after the imposition of the jacket quota.Supporters of the jacket quota over free trade argue that the trade restriction will save jobs in the United States. What are the potential pitfalls ofsuch an argument? Check all that apply.O China may retaliate, imposing restrictions on exports from the United States, thereby generating unemployment in U.S. export industries.O Trade restrictions simply reshuffle jobs by increasing employment in the protected industry and reducing employment in other industries.O Consumers will likely divert large amounts of scarce resources toward lobbying for the removal of the quota.O The costs to domestic jacket consumers may outweigh the benefits of jobs saved in the jacket industry.

Answered: Image /qna-images/answer/64922cff-5445-4b97-b0a2-7efcabc5d760.jpg

The following graph shows the U.S. domestic market for jackets. Jse this graph to answer the questions that follow. 20 18 Domestic Supply Domestic Demand 16 14 12 Domestic Supply 10 8 Price (World) 6 Domestic Demand 4 Price (Quota) 2 + 16 24 32 40 48 56 64 72 80 QUANTITY (Millions of jackets) With no trade, the equilibrium price of a jacket is |$ supplied equal . At this price, both the domestic quantity demanded and the do million jackets. PRICE (Dollars)

The following graph shows the U.S. domestic market for jackets. Jse this graph to answer the questions that follow. 20 18 Domestic Supply Domestic Demand 16 14 12 Domestic Supply 10 8 Price (World) 6 Domestic Demand 4 Price (Quota) 2 + 16 24 32 40 48 56 64 72 80 QUANTITY (Millions of jackets) With no trade, the equilibrium price of a jacket is |$ supplied equal . At this price, both the domestic quantity demanded and the do million jackets. PRICE (Dollars)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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