Macroeconomics (6th Edition)
6th Edition
ISBN: 9780134106229
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 7, Problem 7.4.12PA
To determine
Measuring the economic effects of a quota.
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Students have asked these similar questions
Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where
Sx is the supply curve and Dx is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government
restricts imports of apples to 120,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan's
welfare.
On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a
straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to
indicate the new price of apples with a quota of 120,000 apples.
PRICE (Dollars perton)
1000
900
800
700
000
500
400
300
200 --
100
D
0
30
00
90
120
160
Sk
180 210 240 270 300
5x+Q
--
Price with Quota
Change in PS
Quota Rents
DWL
What will a tariff and an import quota do to the quantity of imports and the domestic price?
reduce the quantity of imports and lower domestic price
increase the quantity of imports and raise domestic price
increase the quantity of imports and lower domestic price
reduce the quantity of imports and raise domestic price
Explain why a quota may result in lower total surplus in the home country than a tariff, even if they have the same effect on imports and the domestic price.
Chapter 7 Solutions
Macroeconomics (6th Edition)
Ch. 7 - Prob. 7.1.1RQCh. 7 - Prob. 7.1.2RQCh. 7 - Prob. 7.1.3RQCh. 7 - Prob. 7.1.4PACh. 7 - Prob. 7.1.5PACh. 7 - Prob. 7.1.6PACh. 7 - Prob. 7.1.7PACh. 7 - Prob. 7.2.1RQCh. 7 - Prob. 7.2.2RQCh. 7 - Prob. 7.2.3PA
Ch. 7 - Prob. 7.2.4PACh. 7 - Prob. 7.2.5PACh. 7 - Prob. 7.2.6PACh. 7 - Prob. 7.2.7PACh. 7 - Prob. 7.2.8PACh. 7 - Prob. 7.2.9PACh. 7 - Prob. 7.3.1RQCh. 7 - Prob. 7.3.2RQCh. 7 - Prob. 7.3.3RQCh. 7 - Prob. 7.3.4RQCh. 7 - Prob. 7.3.5PACh. 7 - Prob. 7.3.6PACh. 7 - Prob. 7.3.7PACh. 7 - Prob. 7.3.8PACh. 7 - Prob. 7.3.9PACh. 7 - Prob. 7.3.10PACh. 7 - Prob. 7.3.11PACh. 7 - Prob. 7.3.12PACh. 7 - Prob. 7.3.13PACh. 7 - Prob. 7.4.1RQCh. 7 - Prob. 7.4.2RQCh. 7 - Prob. 7.4.3PACh. 7 - Prob. 7.4.4PACh. 7 - Prob. 7.4.5PACh. 7 - Prob. 7.4.6PACh. 7 - Prob. 7.4.7PACh. 7 - Prob. 7.4.8PACh. 7 - Prob. 7.4.9PACh. 7 - Prob. 7.4.10PACh. 7 - Prob. 7.4.11PACh. 7 - Prob. 7.4.12PACh. 7 - Prob. 7.4.13PACh. 7 - Prob. 7.4.14PACh. 7 - Prob. 7.4.15PACh. 7 - Prob. 7.5.1RQCh. 7 - Prob. 7.5.2RQCh. 7 - Prob. 7.5.3RQCh. 7 - Prob. 7.5.4RQCh. 7 - Prob. 7.5.5PACh. 7 - Prob. 7.5.6PACh. 7 - Prob. 7.5.7PACh. 7 - Prob. 7.5.8PACh. 7 - Prob. 7.5.9PACh. 7 - Prob. 7.5.10PA
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- Suppose that the United States currently both produces kumquats and imports them. The U.S. government then decides to restrict international trade in kumquats by imposing a quota that allows imports of only six million pounds of kumquats into the United States each year. The figure shows the results of imposing the quota. Fill in the following table (enter all numeric responses rounded to the nearest penny for prices and as whole numbers for quantities). Without With Quota Quota World price of kumquats S U.S. price of kumquats $ Quantity supplied by U.S. million firms Quantity demanded million million million million 교차 Quantity imported million Area of consumer ▼ surplus Area of domestic ▼ ▼ producer surplus Area of deadweight loss V Price ($ per lb.) $1.75 1.50- of A C D HI B E J K 15 16 Q (millions of lbs.) Sus Du.s. 880arrow_forwardThe nation of Textilia does not allow imports of clothing. In its equilibrium without trade, a T-shirt costs $20 and the equilibrium quantity is 3 million T-shirts. One day, after reading Adam Smith's The Wealth of Nations while on vacation, the president decides to open the Textilian market to international trade. The market price of a T-shirt falls to the world price of $16. The number of T-shirts consumed in Textilia rises to 4 million, while the number of T-shirts produced declines to 1 million. If the domestic demand curve and domestic supply are both linear, the resulting increase in the total surplus in the Textilian T-shirt market is about Zero dollars $6 million $14 million) $4 million $12 million $8 millionarrow_forwardWhen China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing.arrow_forward
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