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International Trade Restrictions (Study Plan 7.3)


International Trade Restrictions (Study Plan 7.3)
9. Who gains and who loses from this quota?

✅ Answers (1)

Private answer

Here is a tip:
The import quota is a kind of trade barrier that limits the quantity that can be imported.

The import quota raises the price in the domestic market of Country U from $125 to $150 per container. The higher price forces the wholesalers to cut the quantity demanded by them, which reduces their consumer surplus and therefore makes them lose from the quota imposition.

On the other hand, the growers in Country U enjoy a higher price as a result of which they supply a higher quantity. It increases their producer surplus and makes them gain from the quota imposition.

The importers in Country U also gain from the import quota as it increases their profit by $5 per container.

Verified Answer
The growers and importers of containers in Country U gain, whereas the wholesalers lose due to the imposition of quota.

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Answered on February 8, 2023 10:21 am

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