190PART THREESUPPLY AND DEMAND II: MARKETS AND WELFAREIsolandian price of steel and the world price. Their surplus equals this price dif-ferential times the quantity of imports. Thus, it equals the area of the rectangleE'E''. Total surplus with the quota is the area AB C E' E'' G.To see how total welfare changes with the imposition of the quota, we add thechange in consumer surplus (which is negative), the change in producer surplus(positive), and the change in license-holder surplus (positive). We find that totalsurplus in the market decreases by the area D F. This area represents the dead-weight loss of the import quota.DEEFCGBAPriceof Steel0Quantityof SteelDomesticsupplyDomesticsupplyImport supplyDomesticdemandIsolandianprice withquotaImportswithout quotaEquilibriumwith quotaEquilibriumwithout tradeQuotaWorldpricePricewithoutquotaWorldpriceImportswith quota2QS1QS2QD1QDFigure 9-7THEEFFECTS OF ANIMPORTQUOTA.An import quota, like
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