Question: Use the diagram from Question 5 to analyze the effects of imposing an import quota instead of a tariff to protect domestic shoe producers. Draw

Use the diagram from Question 5 to analyze the effects of imposing an import quota instead of a tariff to protect domestic shoe producers. Draw the diagram as in Question 5 and answer the following questions.
a. Explain why an import quota of Q3Q4 raises the domestic price to pw + t.
b. With import quotas, the Canadian government earns no tariff revenue. Who gets this money now?
c. Is the import quota better or worse than the tariff for Canada as a whole? Explain.

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a At the world price of pw Canadian consumers demand Q 2 units of shoes Q 1 Q 2 of which must come f... View full answer

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