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| Refer to the graphs in Problem 11. Suppose that instead of a tariff, Home applies an import quota limiting the amount foreign can sell to 2 units. a. Determine the net effect of import quota on the Home economy if the quota licenses are allocated to local producers. b. Calculate the net effect of the import quota on Home’s welfare if the quota rents are earned by foreign exporters. c. How do your answers to parts (a) and (b) compare with part (c) of Problem 11? |
