The import quantity under free trade is 500 crates of bananas and the price is $0.50/lb. The government them imposes an import quota of 400 crates and the new price of bananas is $0.55 within the country but unchanged in the rest of the world. Because of an import quota, the producers enjoy a gain of 30, the consumers experience a loss of 120. What is the net welfare effect for the economy if the Government gives away the permits for free____, and if the govt auctions them____? a. Loss of 90, Loss of 70 b. More information is needed c. Loss of 90, Loss of 90 d. Loss of 70, Loss of 90
The import quantity under free trade is 500 crates of bananas and the price is $0.50/lb. The government them imposes an import quota of 400 crates and the new price of bananas is $0.55 within the country but unchanged in the rest of the world. Because of an import quota, the producers enjoy a gain of 30, the consumers experience a loss of 120. What is the net welfare effect for the economy if the Government gives away the permits for free____, and if the govt auctions them____? a. Loss of 90, Loss of 70 b. More information is needed c. Loss of 90, Loss of 90 d. Loss of 70, Loss of 90
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The import quantity under free trade is 500 crates of bananas and the price is $0.50/lb. The government them imposes an import quota of 400 crates and the new price of bananas is $0.55 within the country but unchanged in the rest of the world.
Because of an import quota, the producers enjoy a gain of 30, the consumers experience a loss of 120. What is the net welfare effect for the economy if the Government gives away the permits for free____, and if the govt auctions them____?
a. Loss of 90, Loss of 70
b. More information is needed
c. Loss of 90, Loss of 90
d. Loss of 70, Loss of 90
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