2. A graphical comparison of tariffs and quotas Aa Aa Alagir and Ertil are small
ID: 1140893 • Letter: 2
Question
2. A graphical comparison of tariffs and quotas Aa Aa Alagir and Ertil are small countries that protect their economic growth from rapidly advancing globalization by limiting the import of Chinese toys to 28 million. To this end, each country imposes a trade barrier Based on the following graphs, determine the type of trade barrier each country has chosen to impose. Assume that Alagir and Ertil have identical domestic demand and supply for Chinese toys and SO represents the Chinese toy supply schedule Tool tip: Hover your mouse over the points on the graph to see their coordinates Alagir imposes aY Ertil imposes a subsidy quota PRICE [Dollars per toyl PRICE (Dollars per toy tariff 10 10 S1 SO DO 20 60 80 100 20 60 80 100 QUANTITY (Millions of toysl QUANTITY (Millions of toys) Suppose that in both countries, demand for Chinese toys rises from D0 to D1. As a result, in Alagir, toys will be sold at the price of per toy, whereas in Ertil toys will be sold at the price of per toy In the following table, indicate the quantity of Chinese toys each country imports after an increase in demand, as well as the effects of the trade barriers in each country Alagir 28 million Ertil 28 million Imports (Millions, DO) Imports (Millions, D1) The trade barrier Producers Consumers Which of the following explains why a quota is a all that apply restrictive trade barrier than an equivalent tariff. Check A quota prohibits consumers from switching to the imported good A quota limits the number of goods that can be imported into a country Importers who are willing to pay a higher price will get the product.Explanation / Answer
Alagir imposes a subsidy (for the domestic supplier where the chinese supply increaed to match the same)
Ertil imposed a quota where chinese supply got restricted to a particular amount
In Alagir, 70 million toys will be sold at the price of 4.8 per toy, whereas in Ertil, 80 million toys will be sold at the price of 3.2 per toy.
Imports @D1- Alagir (20 million) i.e. (70-50) and for Ertil it is 30 million (80-50)
A quota limits the number of goods that can be imported to a country
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