2. 3. 4. ince 1953 the United States has imposed a quota to limit the imports of

Question

2. 3. 4. ince 1953 the United States has imposed a quota to limit the imports of peanuts The figure to the right ilustrates the impact of the quota Price pound What is the reduction in value of consumer surplus after the imposition of the quota? US Supply O A. $8 milion O B. $26 25 million O C. $27.75 million OD, $30 milion $3.75 2.75 2.00 1.00F US Príco wth Quota workd price Pw US Demand Quantity (millions of pounds) 10 18 28 34 40 Click to select your answer Message and data rates may apply er View all solutions

Explanation / Answer

1. Reduction in C.S = area (B+E) + area (I + J) + area

= [ (2.75 - 2.00) * 18] + [(34 - 18) * (2.75 - 2)] + [ (1/2)*(40 - 34) * (2.75 - 2.00) =$( 13.5 + 12 + 2.25)million = $ 27.75 million

Answer- option C

2. USA is a domestic country, if it imports goods and services that means goods and services produced by foreign country are purchased by united States.

Similarly, if it exports that means goods and services produced by united States are purchased by foreign country.

Answer- option C

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