Figure 19-7 -Refer to Figure 19-7.Fenwick Currently Both Produces and Imports Pistachios.The

question 135

Essay

Figure 19-7

-Refer to Figure 19-7.Fenwick currently both produces and imports pistachios.The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year.Figure 19-7 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota.Answer questions a-j using the figure.
a.If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers?
b.If there is no quota how many pounds of pistachios would domestic producers supply and what quantity would be imported?
c.If there is no quota what is the dollar value of consumer surplus?
d.If there is no quota what is the dollar value of producer surplus received by producers in Fenwick?
e.If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick?
f.With a quota in place what is the price that consumers of Fenwick must now pay and what is the quantity demanded?
g.With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h.With a quota in place what is the dollar value of producer surplus received by producers in Fenwick? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

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Definitions:

Open Road

Sometimes used metaphorically to refer to freedom or the lack of obstacles for actions or endeavors.

Market-Share Liability

A theory under which liability is shared among all firms that manufactured and distributed a particular product during a certain period of time. This theory of liability is used only when the specific source of the harmful product is unidentifiable.

Toxic Chemical

A substance that poses a risk to health or the environment due to its poisonous properties.

Water Supply

The provision and management of water resources for various uses, including domestic, agricultural, and industrial purposes.