Consider the following hypothetical information pertaining to a country’s imports, consumption, and production of T-shirts following the removal of the MFA quota:

With MFA Without MFA (Free Trade)

World price ($/shirt) 2.00 2.00 Domestic price ($/shirt) 3.00 2.00 Domestic consumption (million shirts/year) 200 250 Domestic production (million shirts/year) 150 100 Imports (million shirts/year) 50 150

a. Graph the effects of the quota removal on domestic consumption and production.

b. Determine the gain in consumer surplus from the removal of the quota.

c. Determine the loss in producer surplus from the removal of the quota.

d. Calculate the quota rents that were earned under the quota.

e. Determine how much the country has gained from removal of the quota.

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