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Unformatted text preview: Imports = 11 = (100 -P) -(50 + 2P) 3P = 100 -50 -11 = 39. P = 13. Thus price rises by 3. (d) What will be the welfare effects on this country of a quota of 11 units (e) Suppose instead that this country negotiates a VER of 11 units with its chief foreign supplier. What are the welfare effects of this policy? (d & e) The welfare effects include the deadweight loss and (possibly) the quota rents. Consumption DWL = ½*3*3 = 4.5 Production DWL = ½*6*3 = 9 Total DWL = 13.5 The quota rents = equivalent tariff*imports = 3*11 = 33. The welfare cost is either 13.5 (part d) or 46.5 (part e)....
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This note was uploaded on 08/25/2009 for the course ECON 333 taught by Professor Yavas,cemilepan,lu during the Fall '06 term at Pennsylvania State University, University Park.
- Fall '06
- Supply And Demand