Figure 5.3. Sweden's Apple Market
-Consider Figure 5.3.Assume that Swedish import companies behave as competitive buyers while foreign export companies behave as monopoly sellers.Compared to free trade, Sweden's import quota results in domestic welfare

Question

Figure 5.3. Sweden's Apple Market 
-Consider Figure 5.3.Assume that Swedish import companies behave as competitive buyers while foreign export companies behave as monopoly sellers.Compared to free trade, Sweden's import quota results in domestic welfare

Quizplus · Accepted Answer

The import quota results in a higher price for apples in Sweden, which leads to a reduction in consumer surplus and an increase in producer surplus. However, the loss in consumer surplus is larger than the gain in producer surplus, resulting in a net welfare loss of $4.80.