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Costa Rica is a small€ country and assumed to be unable to affect world prices. It imports blueberries at a price of 10 dollars per box.

The domestic supply and domestic demand curves for boxes are: S = 60 + 20P D = 1160 - 15P

a) Assume Costa Rica is completely open to trade. What are the equilibrium price and quantity consumed? How much is produced domestically, and how much is imported?

b) Now consider the effect of an import quota of 400 boxes. What happens to the price of Blueberries and the quantity consumed?

c) Who wins and who loses? Discuss consumers, domestic producers, and importers (be sure to compute the change in their welfare).

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019

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Related questions

The demand for computers in a certain country is given by D = 20000 – 300P; where P is the price of a computer. Supply by domestic computers producers is S = 10000 + 100P.

(a) Assuming that the economy is closed, find the equilibrium price and production quantity of computers.

(b) The economy opens to trade. The world price of a computer is $20. Find the domestic quantities demanded and supplied and the quantity of imports or exports. Who will support the opening of the computer market to trade and who will oppose it?

(c) The government imposes a tariff of $1 per computer. Find the effects on domestic quantities demanded and supplied and on the quantity of imports or exports. Also find the tariff revenue collected by government. Who will support the imposition of tariff and who will oppose it?

(d) Suppose the government imposes an import quota of 1600 computers. Find the equilibrium price in the domestic computer market, as well as the quantities produced by domestic firms and purchased by domestic consumers.

In 2013, U.S. sugar imports are restricted by way of an import quota. The domestic sugar price is kept above the world market price of sugar by way of a federal domestic price guarantee. A special feature of the sugar import quota is that the rights to sell the sugar in the united states are allocated to the governments of foreign nations, who then allocate these rights to their own residents, just like a voluntary export restraint.

The quantity demanded was estimated to be 5.7 million tons, the quantity supplied was 2.7 million tons, and the price was $426 per ton when the quota was in effect. Also estimated (with free trade) was the world market price of $275 per ton of sugar, the quantity demanded would be 6.9 million tons, and the quantity supplied would be about 1.8 million tons of sugar per year.

In 2013, the size of the U.S. population was about 316 million. In the same year, the sugar industry employed about 6,500 workers. Assume the U.S. is a "small nation" when it comes to sugar imports.

a. what is the total dollar amount the U.S. loses or gains from imposing the import quota? How much of this amount is earned by foreigners?

b. How much did the sugar quota cost or benefit the average U.S. consumer (assuming each resident was a sugar consumer)?

c. What was the implicit subsidy per worker, based on the impact of the import quota on sugar producers?

1. True or False: Increases in imports will always lead to NET job losses in the U.S. domestic economy.

Would this be false?

2. True or False: If all countries could restrict imports and promote exports, world output would rise.

Would this be false as well?

3. Which of the following statement is FALSE?
A.Quotas restrict the quantity of a good that is imported into a country.
B.One result of quotas is that consumers of the good facing the quota will pay a higher price for the good.
C.Domestic producers of the good will benefit because they face less foreign competition.
D.Government collects the revenue from quotas.

Is it B?

4. True or False: If country A has an absolute advantage in producing many goods and services over another country B, then country A will NEVER have an incentive to trade with country B.

I want to say its False because regardless if country A has an absolute advantage it still needs to trade with country B. I think?

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