8. Effects of a quota on domestic prices The following graph shows the domestic

Question

8. Effects of a quota on domestic prices

The following graph shows the domestic demand for and supply of barley in Canada. The horizontal green line shows the world price of $1 for a bushel of barley. Canada imports barley primarily from the United States. Assume that the amount demanded by any one country does not affect the world price of barley.

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

(Note: Once you enter a value in a white field, the graph and any corresponding amounts in the grey fields will change accordingly.)

The Canadian government decides to impose trade restrictions on barley imports by setting a quota of 10 million bushels of barley. With the quota, the price of barley in Canada will be ($_________)per bushel.

The Canadian government explains that it is necessary to impose trade restrictions on barley to protect workers in the domestic barley industry. Assume that the Canadian government would like to generate government revenue through its protectionist policies. Which of the following would provide the Canadian government with revenue? Check all that apply.

a) A quota on barley in which the import licenses are distributed via lottery

b) A quota on barley in which import licenses are auctioned off to U.S. barley producers

c) A tariff on U.S. barley

d) A quota on barley in which import licenses are given to the U.S. government for free distribution to U.S. barley producers

Explanation / Answer

Answer)

The Canadian government decides to impose trade restrictions on barley imports by setting a quota of 10 million bushels of barley. With the quota, the price of barley in Canada will be $4 per bushel.

Check all that apply.

b) A quota on barley in which import licenses are auctioned off to U.S. barley producers.
c) A tariff on U.S. barley

Related Questions

Navigate

• Browse (All)
• Browse 8
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.