Question

EOC 16.29 Now assume that the quota is set at a level higher than the current level of imports. The resulting equilibrium price paid by consumers in the imported softwood lumber market will O ARise Fall O CNot change O D May rise or fall

Answer 1

1. Now assume the quota is set at a level higher than the current level of imports .The resulting equilibrium price paid by consumers in the imported softwood lumber market will fall.Because as the level of imports increases , now the consumers would pay less price .Hence, option(B) is correct.

2. Once again assumed that quota is set at a level lower than the current level of imports, the resulting equilibrium price received by the producer in the imported Canadian softwood lumber market will rise. Because as the level of imports fall, price rises. Hence,option(A) is correct.

3. The equilibrium price in the world market is at which import of U.S equals to export from Japan. At price of $3, U.S imports = (70-40)= 30 and Japan exports = (60-30)=30 . So, world equilibrium price=$3 . Hence,option(C) is correct.