a. Using the graph above, at the world price of $80 per tire, how many tires will the United States import? _____million tires Now Suppose the U.S. government imposes a quota as shown in the graph above. b. Using this same graph, indicate the new market equilibrium with the quota imposed and the domestic quantity supplied (Qs).
The graph below shows the market for tires in the United States, a nation that is open to international trade but is assumed to be a price taker unable to affect the world price of tires.
a. Using the graph above, at the world price of $80 per tire, how many tires will the United States import?
_____million tires
Now Suppose the U.S. government imposes a quota as shown in the graph above.
b. Using this same graph, indicate the new market equilibrium with the quota imposed and the domestic quantity supplied (Qs).
Instructions: Use the tools provided "New Equilibrium" and "Qs + quota" to indicate the new market price, quantity demanded, and domestic quantity supplied with this quota.
c. As a consequence of this quota, how many tires will the United States import now?
_____million tires
How many tires will be supplied domestically?
_____million tires
Now suppose instead that the U.S. government imposes a quota with the goal of reducing the number of tires imported by 50% (half of the value in part a).
d. Using the graph below, indicate the new supply with the quota imposed as well as the new market equilibrium and the domestic quantity supplied (Qs) under the new quota.
Instructions: First, drag the "S + Quota" line to the appropriate location. Then use the tools provided "New Equilibrium" and "Qs + quota" to indicate the new market price, quantity demanded, and domestic quantity supplied with this quota.
e. Comparing the first quota with the new quota, we find that the new quota will benefit
multiple choice
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both domestic consumers and domestic tire producers.
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domestic tire producers only.
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foreign tire producers only.
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both domestic and foreign tire producers.
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