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How low must a quota be in effect to have an impact? Using a demand-and-supply-ECON 251 fall 2014




Question;1. How low must a quota be in effect to have an impact? Using a demand-and-supplydiagram, illustrate and explain the net welfare loss from imposing such a quota. Underwhat circumstances would the net welfare loss from an import quota exceed the netwelfare loss from an equivalent tariff (one that results in the same price and import levelas the quota)?2. Explain the national defense, declining industries, and infant industry arguments forprotecting a domestic industry from international competition.3. Use these data to answer the following questions about the market for British pounds:Price of pounds (in $)$ pounds)QuantitySupplied(of pounds)50751001007550a. Draw the demand and supply curves for pounds, and determine the equilibrium exchange rate(dollars per pound).b. Suppose that the supply of pounds doubles. Draw the new supply curve.c. What is the new equilibrium exchange rate?d. Has the dollar appreciated or depreciated?e. What happens to U.S. imports of British goods?


Paper#55746 | Written in 18-Jul-2015

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