Imported quota - Detailed analyisis

• According to the text, what is the main topic being analyzed?

  The impact of a quota on a market
• What happens to the price as a result of a quota?

  The price increases
• In the diagram, how does the price change due to the quota?

  From PW to PW + Q
• What happens to domestic demand when a quota is imposed?

  Domestic demand contracts
• How does domestic demand change, according to the text?

  From Q2 to Q4
• What effect does a quota have on domestic supply?

  Domestic supply increases
• How does domestic supply change, according to the text?

  From q1 to q1 plus Q3 Q4
• What is the primary intention of imposing a quota?

  To restrict the level of imports
• How does the level of imports change because of the quota?

  From q1 Q2 to q1 Q3
• What happens to domestic producer revenue as a result of the quota?

  It increases substantially
• Initially, what was the domestic producer revenue?

  A
• What does the domestic producer revenue change to?

  A + E + C + H + I
• What area represented foreign producer revenue before the quota?

  B, C, and D
• What area represents foreign producer revenue after the quota?

  B, F, and G
• Why is the impact on foreign producer revenue uncertain?

  Actual figures are needed to determine the change
• According to the text, what are the dead weight losses represented by?

  I and J
• What does 'J' represent in terms of deadweight loss?

  A loss of consumer surplus
• What does 'I' represent in terms of deadweight loss?

  A loss of world efficiency
• Why is there a loss of world efficiency (I)?

  Domestic suppliers produce at a higher cost
• How do quotas affect domestic suppliers comparative advantage?

  Quotas allow less efficient suppliers to produce
• According to the text, what three components do you need to analyse the impact of quotas?

  Impact on p's and q's, revenue, dead weight losses
• Why do domestic suppliers still produce units despite not having a comparative advantage?

  Due to the artificial increase in price