Figure 7.3

Assume that the Canadian government limits the import of peanuts.
-Refer to Figure 7.3.What is the area that represents revenue to foreign producers who are granted permission to sell in the Canadian market when there is a quota?
A)I + J
B)E + I + J + M
C)I + J + K+ L
D)G + H + I + J

Question

Figure 7.3
  
Assume that the Canadian government limits the import of peanuts.
-Refer to Figure 7.3.What is the area that represents revenue to foreign producers who are granted permission to sell in the Canadian market when there is a quota?
A)I + J 
B)E + I + J + M 
C)I + J + K+ L 
D)G + H + I + J

Quizplus · Accepted Answer

The area representing revenue to foreign producers who are granted permission to sell in the Canadian market when there is a quota is the sum of areas I, J, K, and L. This is because these areas represent the quantity of peanuts that foreign producers are permitted to sell in the Canadian market under the quota, multiplied by the price at which they can sell them. Areas E, G, and H represent revenue to domestic producers, while area M represents deadweight loss, which is a loss to society as a whole due to the reduction in total surplus caused by the quota.

Figure 7.3 Assume That the Canadian Government Limits the Import of Peanuts