A. Chapter 8: Import Quotas 3. Aoslia is a small country that takes the world price...

A. Chapter 8: Import Quotas
3. Aoslia is a small country that takes the world price of corn as
given. Its domestic supply and demand for corn are given by the
following: Hint: You need to use graphs to answer this question.
D = 45 − 3P
S = 3P − 9
a. Assume initially that Aoslia does not open to trade. What is the autarky
equilibrium price and quantity?
b. Aoslia decides to engage in trade at the world price of $6 per bushel of
corn. What is the quantity supplied and the quantity demanded at this
world price?
c. The Aoslia government now imposes a tariff in the amount of $1
(i.e., t = $1). What is the quantity supplied and the quantity demanded at this
new price with the tariff?
d. Suppose the Aoslian government applies an import quota that limits
imports to 12 bushels. Determine the quantity demanded, quantity
supplied, and new domestic price with the quota.
e. Calculate the quota rent.
f. Assuming that the quota licenses are allocated to domestic producers,
what is the net effect of the quota on Aoslia’s welfare?
g. Assuming that the quota rents are earned by foreign exporters, what is
the net effect of the quota on Aoslia’s welfare?

Expert Solution

Please comment if having any query.
UPVOTE, your help means a lot to me.
I really need your generous support.

Rahul Sunny answered 1 year ago

Lummerland is a small country that takes the world price of corn as given. Its domestic...

Lummerland is a small country that takes the world price of corn as given. Its domestic supply and demand for corn are given by the following demand and supply curves: Demand: Q = 45 − 3P Supply: Q = 3P − 9 a. Assume initially that Lummerland does not open to trade. What is the autarky equilibrium price and quantity? b. Suppose Lummerland decides to engage in trade. Determine the quantity demanded, quantity supplied, and import given the world price...

Suppose the price of import good is 20 dollar before tariff, and now a small country...

Suppose the price of import good is 20 dollar before tariff, and now a small country posted a 10% tariff on this product. As the results, the production of this product of this small country increase from 1000 to 1200. And the import of this product decreased from 600 to 200 units. a. What is the change of producer's surplus? b. What is the change of consumer's surplus? c. What is the total tariff revenue? d. What is the total...

Suppose a small country faces a world price of $9.50 for a product that it imports....

Suppose a small country faces a world price of $9.50 for a product that it imports. If the small country doubles its imports, explain clearly the effect this will have on the global price of the good.

Acirema is a small country, unable to affect world prices. It imports sugar at a price...

Acirema is a small country, unable to affect world prices. It imports sugar at a price of $10 per bag. The demand curve in Japan is D=1000 - 25P and the supply curve is S=100 + 5P. Using a graphical analysis please answer the following questions: a) Calculate the quantity supplied, quantity demanded, and equilibrium imports when free trade prevails. b) Suppose an import quota limits imports to 300 bags of sugar. Calculate the production distortion loss, the consumption distortion...

A small country both produces and imports bread, the world price of which is $1 per...

A small country both produces and imports bread, the world price of which is $1 per loaf. Production of the bread causes a pleasant smell, which the producers of bread are unable to charge for, and which the people in the country enjoy. In fact, it has been ascertained that the value of this smell to society is $0.50 per loaf. 1. Show and explain why, in the absence of any other policy, a tariff on bread in this country...

4. A small country imports sugar. With free trade at the world price of $0.10 per...

4. A small country imports sugar. With free trade at the world price of $0.10 per pound: Domestic production = 120 million pounds Domestic consumption = 420 million pounds Imports = 300 million pounds. The country’s government now decides to impose a quota that limits sugar imports to 240 million pounds. With the import quota in effect, the domestic price rises to $0.12 per pound, and domestic production increases to 160 million pounds. The government allocates the licenses to import...

It is more efficient for the government of a small country to impose an import tariff...

It is more efficient for the government of a small country to impose an import tariff than a production subsidy to stimulate output because it does not have to pay the producers directly. Comment and Explain why?

explain how trade restrictions (quotas, import duties, etc.) imposed in any specific country have different consequences...

explain how trade restrictions (quotas, import duties, etc.) imposed in any specific country have different consequences for different economic actors (consumers, employers, and workers). You should be able to explain that any step to impose or lift trade restrictions will help some while also hindering others.

Andorra is a small country, incapable of affecting world prices. It imports peanuts at the world...

Andorra is a small country, incapable of affecting world prices. It imports peanuts at the world price of 10 cents per sack. Andorra’s demand for peanuts is given by: D = 400−10P. Andorra’s supply curve for peanuts is: S = −20 + 5P. Determine the equilibrium under free trade. a) Calculate and show in a diagram the following effects of a quota that limits the import of peanuts to 60 sacks. The increase in the domestic price. The quota revenue....

Chapter 8) Suppose country A pegs its currency to country B (i.e., country B is the...

Chapter 8) Suppose country A pegs its currency to country B (i.e., country B is the center country). Suppose country A is in recession. To help country A, what does the country B’s Central Bank can do? As a result, what happens to IS and LM curves in both countries? (Use graphs to explain)

Question