Consider the market for steel illustrated in the graph to the right, which initially has no quota limiting the amount of steel imported. What effect does a U.S. quota on steel of Q>0 have on the equilibrium in the U.S. steel market? (Hint: The answer depends on whether the quota binds: is low enough to affect the equilibrium.) Assume that at prices below p, the quota is non-binding, and that without a quota, domestic and foreign firms both are willing to supply steel. Assume that the foreign supply curve of steel is upward sloping. 1.) Use the line drawing tool to show how the market supply curve changes because of the quota. Label this line 'Squota 2.) Use the point drawing tool to indicate the equilibrium price and quantity with the quota. Label this point 'e quota Carefully follow the instructions above, and only draw the required objects. p, Price per unit of steel Q, Units of steel per year S D

Consider the market for steel illustrated in the graph to the right, which initially has no quota limiting the amount of steel imported. What effect does a U.S. quota on steel of Q>0 have on the equilibrium in the U.S. steel market? (Hint: The answer depends on whether the quota binds: is low enough to affect the equilibrium.) Assume that at prices below p, the quota is non-binding, and that without a quota, domestic and foreign firms both are willing to supply steel. Assume that the foreign supply curve of steel is upward sloping. 1.) Use the line drawing tool to show how the market supply curve changes because of the quota. Label this line 'Squota 2.) Use the point drawing tool to indicate the equilibrium price and quantity with the quota. Label this point 'e quota Carefully follow the instructions above, and only draw the required objects. p, Price per unit of steel Q, Units of steel per year S D

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 7PA

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