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Answers the following questions (Hint use the online textbook) 1- If a country used quotas to...

Answers the following questions (Hint use the online textbook) 1- If a country used quotas to protect its domestic sugar industry. What is likely the impact of the quota on the world price market (relative to the price that exists under free trade? How this change impact on the country local producers of this country? what is impact on the country’s local consumers? Use a graph to answer your question?

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Answer #1

At world price of Pw, demand was Q4 while supply was Q1. Thus, imports was Q4 - Q1. Quota imposed on sugar will shift supply curve to its right from Supply to Supply + quota. If country wants to impose quota equal to Q2 - Q1, it will raise price from Pw to P which raise supply and reduce demand.

Local consumers would be hurt where Loss of consumer surplus equal area of portion A + B + C + D while producers benefits where gain of producer surplus equal area of portion A.

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