Question

Suppose that the U.S. government imposes quota on cheese imported form Europe . Who would likely be helped and hurt?

What is NAFTA, and what have been its effects to date? 50 words

Why are some economists concerned that the United States borrows too much from abroad?

Answer 1

1)

The quota is quantity restriction on import. Suppose before quota restriction country import (Q2-Q1). Now quota restriction is (Q4-Q3). It increases the domestic price to Pq.

At price Pq consumer loss by the area of (A+B+C+D)

Producers gain by the area of A

Here government ears no revenue. The area C is the quota rent (how much extra that foreigners are willing to pay to sell in the protected market).

By imposing quota society loss by the area of (B+C+D)

So producers are helped and consumers are hurt by quota restriction.