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Figure: The Market for Calculators
-(Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, P_W, equals $100. The government imposes a quota restricting imports to 25 calculators. The domestic price rises to _____ and the quota rent is equal to area _____.

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Figure: The Market for Calculators

-(Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, P_W, equals $100. The government imposes a quota restricting imports to 25 calculators. The domestic price rises to _____ and the quota rent is equal to area _____.

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When a quota is imposed, the domestic price rises to the point where domestic supply equals domestic demand. In this case, the domestic supply is limited to 25 calculators, which means that at a price of $120, domestic producers will supply 25 calculators (point S2 in the figure), and domestic demand will also be satisfied at a price of $120, which is represented by point D2. Therefore, the domestic price rises to $120.
 
To find the quota rent, we need to find the difference between the domestic price and the world price (which is now the price that foreign producers receive after the quota is imposed, since the quota limits imports). Thus, the quota rent is equal to the shaded area H+I, which represents the increase in the price that consumers have to pay compared to the world price, multiplied by the quantity of the quota (25 calculators). Therefore, the answer is C, $120; H + I.

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