Zenobia is a small country that takes the worldprice of barley as given. Its domestic supply anddemand for barley are given by:D = 60 – 4PS = 4P – 127 euro for every bushel of barleySuppose the Zenobian government applies animport quota that limits imports to 12 bushels.a) Determine the quantity demanded, quantitysupplied, and new domestic price with the quota.b) Calculate the quota rent.c) Assuming that quota licenses are allocated todomestic producers, what is the net effect of thequota on Zenobia's welfare?d) Assuming that quota rents are earned byforeign exporters, what is the net effect of thequota on Zenobia's welfare?

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Zenobia is a small country that takes the world price of barley as given. Its domestic supply and demand for barley are given by: D = 60 – 4P S = 4P – 12 7 euro for every bushel of barley -

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

Zenobia is a small country that takes the world
price of barley as given. Its domestic supply and
demand for barley are given by:
D = 60 – 4P
S = 4P – 12
7 euro for every bushel of barley
Suppose the Zenobian government applies an
import quota that limits imports to 12 bushels.
a) Determine the quantity demanded, quantity
supplied, and new domestic price with the quota.
b) Calculate the quota rent.
c) Assuming that quota licenses are allocated to
domestic producers, what is the net effect of the
quota on Zenobia's welfare?
d) Assuming that quota rents are earned by
foreign exporters, what is the net effect of the
quota on Zenobia's welfare?

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