I need a detailed explanation for #20. Graph 9.5.2. 17) Refer to Figure 9.5.2 ab

Question

I need a detailed explanation for #20. Graph 9.5.2.

17) Refer to Figure 9.5.2 above. Now suppose an import quota of 3000 trucks is imposed. The quota will otal consumer surplus equal to A) $25,000. B) $13,125,000.u C) $40,000,000.u 0,000· E) $75,625,000 Answer: D Diff: 2 Section: 9.35 fer to Figure 9.52 above. Now suppose an import quota of 3000 trucks is imposed. The quota will 18) Re make total domestic producer surplus equal to A) $2,500 B) $5,000 C) $5,000,000 D) $10,000,000. E) $30,000,000 Answer: C Diff: 2 Section: 9.5 19) Refer to Figure 9.5.2 above. Now suppose an import quota of 3000 trucks is imposed. Government revenue from the quota will be: B) $2,500 C) $7,500,000. D) $12,500,000 E) $13,125,000. Answer: A Diff: 1 Section: 9.5 o Figure 9.5.2 above. Now suppose an import quota of 3000 trucks is imposed. The quota will 20) Refer t decrease the revenue of foreign firms by: A) $O. B) $2,500. C) $7,500,000 D) $11,250,000,- E) $13,125,000. Answer: D Diff: 2 Section: 9.5

Explanation / Answer

(20)

Before import quota import was= (55,00 -1,000)

= 4500 units

price =12,500

total revenue of the foreign firm = P* import quantity

=12,500 * 4500

=56250,000

After import quota price =15,000

import quantity = 5000 - 2000

=3000

TR of forign firm = 15,000* 3000

=45,000,000

The decrease in TR after import quota of the foreign firm= 56,250,000 - 45,000,000

=11,250,000

Hence option D is the correct answer.

  

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