Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where SK is the supply curve and Dk is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government restricts imports of apples to 200,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan's welfare. On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to indicate the new price of apples with a quota of 200,000 apples. PRICE (Dollars per ton) 1000 900 800 700 600 500 400 300 200 ——— 100 0 0 SK D 50 100 150 200 250 300 350 400 QUANTITY (Thousands of tons) K P₁ W 450 500 SK+Q Price with Quota A Change in PS Quota Rents DWL (? In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus (PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quota rents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota's consumption and protective effects.

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 8PA

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Import Quotas. Please fill in the graph showing the 5 things to the right of it please with labels on it and the 2 questions at the bottom. Thank you!

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Kazakhstan is an apple producer, as well as an importer of apples. Suppose the following graph shows Kazakhstan's domestic market for apples, where
SK is the supply curve and Dk is the demand curve. The free trade world price of apples (Pw) is $200 per ton. Suppose Kazakhstan's government
restricts imports of apples to 200,000 tons. The world price of apples is not affected by the quota. Analyze the effects of the quota on Kazakhstan's
welfare.
On the following graph, use the purple line (diamond symbol) to draw the Kazakhstan's supply curve including the quota SK+Q. (Hint: Draw this as a
straight line even though this curve should be equivalent to the domestic supply curve below the world price.) Then use the grey line (star symbol) to
indicate the new price of apples with a quota of 200,000 apples.
PRICE (Dollars per ton)
1000
900
800
700
600
500
400
300
200
100
0
▬▬▬
0
50
Sk
K
100 150 200 250 300 350
QUANTITY (Thousands of tons)
D
K
P
W
400 450 500
SK+Q
Price with Quota
A
Change in PS
Quota Rents
DWL
(?)
In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus
(PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quota
rents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota's consumption and protective effects.

PRICE (Dollars per ton)
1000
900
800
700
600
500
400
300
200 --
100 +
0
0
50
SK
D₁
K
W
100 150 200 250 300 350 400 450 500
QUANTITY (Thousands of tons)
SK+Q
The equivalent import tariff for Kazakhstan's apple import quota is $
Price with Quota
A
Change in PS
Quota Rents
DWL
(?)
In the previous graph, use the green area (triangle symbol) to shade the area that represents the effect of the quota on domestic producer surplus
(PS) relative to domestic producer surplus under free trade. Use the tan quadrilateral (dash symbols) to shade the area that represents the quota
rents. Finally, use the black areas (plus symbol) to indicate the deadweight loss (DWL) resulting from the quota's consumption and protective effects.
per ton of apples.
If Kazakhstan's government auctions off the quota licenses in a well-organized, competitive auction, Kazakhstan experiences a deadweight loss of
(Hint: Select a shaded region to see its area. Be sure to adjust for the units on the quantity axis.)

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