The nation of Acirema is small and unable to affect world prices. It imports peanut at the
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The nation of Acirema is “small” and unable to affect world prices. It imports peanut at the price of $10 per bag. The demand curve is
D = 400 – 10P
The supply curve is
S = 50 + 5P.
Determine the free trade equilibrium. Then calculate and graph the following effects of an import quota that limits imports to 50 bags.
a. The increase in the domestic price.
b. The quota rents.
c. The consumption distortion loss.
d. The production distortion loss.
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At a price of 10 per bag of peanuts Acirema imports 200 bags of peanuts A quota limiting the im...View the full answer
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Related Book For
International Economics Theory and Policy
ISBN: 978-0273754206
9th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
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