Figure 19-3
Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota.
-Refer to Figure 19-3.What is the value of the deadweight loss as a result of the quota?

Question

Figure 19-3
  Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 19-3 illustrates the impact of the quota.
-Refer to Figure 19-3.What is the value of the deadweight loss as a result of the quota?

Quizplus · Accepted Answer

The deadweight loss is the triangle formed by the equilibrium price and quantity without the quota and the equilibrium price and quantity with the quota. The base of the triangle is the difference between the equilibrium quantity without the quota and the equilibrium quantity with the quota, which is 2 million units. The height of the triangle is the difference between the equilibrium price without the quota and the equilibrium price with the quota, which is $4 per unit. Therefore, the area of the triangle, which represents the deadweight loss, is 0.5 * 2 million units * $4 per unit = $4 million.

Figure 19-3 Since 1953 the United States Has Imposed a Imposed