Measuring the economic effects of a quota.

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Answer 1

Question

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine

Measuring the economic effects of a quota.

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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. 880

[India is the world’s largest consumer of sugar. Assume the world price for sugar is $750 per ton.] [Assume India currently has a tariff of $50 per ton on sugar and imports 7 million tons of sugar. Show this situation in a graph. Label the quantity demanded and the quantity supplied domestically and imports clearly on a graph. Explain your graph in 3-4 sentences. 2. [ Suppose India decides to remove the tariff, show the effect of this change on India’s imports on the graph. Clearly label the new domestic quantity demanded and the quantity supplied. You must use the same graph as you have drawn in answer to Part a to show this new scenario. How does this policy affect consumers, producers, and the government in India? You only have to state who benefits or harms from the policy. 3. [Label the areas in your graph and fill in the following table. With Tariff Free Trade (after the tariff is removed) Consumer Surplus Producer Surplus Government…

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

Answer 2

Question

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine

Measuring the economic effects of a quota.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine

Measuring the economic effects of a quota.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine

Measuring the economic effects of a quota.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine

Measuring the economic effects of a quota.

Answer 6

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine

Measuring the economic effects of a quota.

Answer 7

Chapter 9, Problem 9.4.11PA

Explanation:

Figure 1 illustrates the impact of world price and domestic price that creates trade diversification and creation.

images

Figure 1

Figure 1 depicts the demand and supply of kumquats in the U.S. market after the quota restriction is imposed. Horizontal axis represents the quantity of kumquats in millions of pounds and the vertical axis represents the price in dollars per pound. The U.S. government imposes a quota of import of 6 million pounds of kumquats to the U.S. each year.

Using Figure 1, Table 1 is filled as follows:

Table 1

	Without Quota	With Quota
World price of kumquats	$0.75	$0.75
U.S. price of kumquats	$0.75	$1.00
Quantity supplied by U.S. firms	4 million	6 million
Quantity demanded	13 million	12 million
Quantity imported	9 million	6 million
Area of consumer surplus	A + B + C + D + E + F	A + B
Area of domestic producer surplus	G	C + G
Area of deadweight loss	No deadweight loss	D + F

When there is no quota, the quantity demanded is 13 million pounds of kumquats; out of which 4 million pounds is supplied by U.S. firms and rest 9 million pounds of kumquats (=13−4) are imported. When quota restriction of 6 million pounds of kumquat is imposed, 6 million pounds only can be imported against 12 million pounds of quantity demanded, rest 6 million pounds (=12−6) is supplied by the U.S. firms at U.S price of $1.

Consumer surplus is calculated as the area below the demand curve and above the market price. So, area of consumer surplus without quota is between market price of $0.75 and the demand curve, which is the sum of the areas A, B, C, D, E and F. The producer’s surplus is between U.S supply curve (above) and market price (below), which is the area G. With quota, consumer surplus is between price $1 and U.S demand curve, which is the sum of areas A and B, and the producer’s surplus which is increased by quota is the sum of areas C and G. There is no deadweight loss, if quotas are not imposed. With quota areas D and F denote the deadweight loss.

Concept introduction:

Quota: It is the numerical limit that a government imposes on the quantity of goods that can be imported into a country.

Consumer surplus: It is the monetary gain attained by a consumer, which is calculated as the difference between the price a consumer pays for the product and the price he would be willing to pay rather than do without it.

Producer surplus: It is the benefit attained by a producer by selling a product, which is calculated as the difference between the amount that a producer is willing to supply goods for and the actual amount received by him, when he makes the trade.

To determine