Question

nswer the question(s) below based on the following diagram 14) Refer to the figure above. The quota shown in the diagram equals A) 500 units. B) 1000 units. C) 1200 units D) 200 units. 15) Refer to the figure above. The quota restricts trade by the same amount as a tariff of A) 550. B) $20. C) $30. D) Cannot answer without more information. 16) Refer to the figure above. Quota rents equal A) $5000 B) $10000 C) 56000 Dy$2000. 17) 17) Refer to the figure above. If the government was to auction quota licenses competitively, it could B) $10000, 52000 D) 56000 earn up to A) $5000 15) Refer to the figure above. The quota generates deadweight costs of A) $50.000 B) $30,000 $12.000 D) $10.000 19) 19) Refer to the figure above. If this were a voluntary restraint agreement the welfare costs to the importing country would be A) 560,000 B) $18.000 C) 514,000 D) $38.000 20) Which of the following is a valid argument for protection? A) tair trade By creation of employment national defense D) All of the above

Answer 1

14) Quota = 1000 units. It is the quantity supplied even though at that price demand is 1200 units.

15) Option a) 50 dollars is correct.

16) Quota rent = (50 - 20) * 200 = 6000. Option c) is correct.

17) 200 * 50 = 10000. Opion d) is correct. Maximum price he can charge = 50 and maximum quantity at that price = 200.

18) DWL = Left triangles = 1/2 * (1000 - 800) * 30 = 30000

20) Option c) is correct