un QUESTION 1 ( CS. QUOTA Open Economy (International Trade) with Import Quota (Import Licence fee is $8/ton) The domestic Maize Market for a small, closed economy of country XYZ is shown in the model below, and world price is $10/ ton. Suppose the government of country XYZ decides to reduce imports, but in this case, the government doesn't care how much is produced, only how much is imported. The government decided to add licence fee ($8/ton of import maize) to reduce imports. The model is shown below: Maize Market with Import Quota Price/ton 70 60 50 40 32 30 22 18 10 2 0 5 8 10 = S(domestic) Domestic Price (with Import Quota) 14 15 20 Quantity of tons of Maize (in 1000's) D(domestic) 25 World Price 30 35

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