Exhibit 19-8

-Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the gain to those firms awarded the right to import the 50 units and sell them at the new domestic price?

Question

Exhibit 19-8
 
-Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the gain to those firms awarded the right to import the 50 units and sell them at the new domestic price?

Quizplus · Accepted Answer

The gain to firms awarded the right to import the 50 units and sell them at the new domestic price is represented by the area above the world price (which is their cost) and below the new domestic price, which includes both the consumer surplus they capture (area c) and the additional profit they make on each unit sold (area d).

Exhibit 19-8 -Refer to the Graph in the Exhibit.Suppose the Country Is