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? ) 40 Domestic Demand Domestic Supply 36 Price World) 28 24 Price Quota 20 PRICE (Dollars) 16 12 CO 24 48 72 96 120 QUANTITY (Millions of jackets) In the absence of foreign trade , the equilibrium price of a jacket is $ At this price, both the domestic quantity demanded and the domestic quantity supplied equal million jackets. Suppose that trade between the United States and China is open and that the United States initially imposes no tariffs or quotas on jackets imported from China. Assume that China has a comparative advantage in producing jackets and charges the world price of $12 per jacket. (Note: Throughout the problem, assume that the amount demanded by any one country does not affect the world price of jackets.) On the previous graph, use the grey line (star symbol) to indicate the world price of jackets. At the world price of $12 per jacket, the quantity of jackets demanded by U.S. buyers is million jackets, the quantity of jackets supplied by U.S. manufacturers is million jackets, and the quantity of jackets imported from China is million jackets.Suppose now that the United States places a quota on imports of jackets from China, which limits imports of Chinese jackets to 24 million. (Hint: The original domestic supply curve represents domestic production only.) On the previous graph, use the purple line (diamond symbol) to indicate the new [1.5. price under the quota. Under the quota, the price ofjackets is _ the quantity supplied by us. producers is E million jackets, and the quantity demanded by U.S. consumers is E million jackets. Compared to conditions under free trade, U.S. manufacturers sell V jackets and receive V price after the imposition of the jacket quota. while U.S. consumers buy v jackets and pay v price after the imposition of the jacket quota. Supporters of the jacket quota oyer free trade argue that the trade restriction will save jobs in the United States. What are the potential pitfalls of such an argument? Check 5!! tnatappiy, CI Trade restrictions simply reshuffle jobs by increasing employment in the protected industry and reducing employment in other industries. D China may retaliate, imposing restrictions on exports from the United States. thereby generating unemployment in U.S. export industries. D Consumers will likely divert large amounts of scarce resources toward lobbying for the removal of the quota. D The costs to domestic jacket consumers may outweigh the benets of jobs saved in the jacket industry. The following problem analyzes the Guatemalan market for pears. The graph below shows the domestic supply and demand curves for pears in Guatemala. Assume that Guatemala's government does not currently permit international trade in pears. Use the black point (plus symbol) to denote the equilibrium price of one ton of pears and the equilibrium quantity of pears in Guatemala without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. (?) 390 Domestic Demand Domestic Supply .+ 380 Equilibrium without Trade 370 360 350 Consumer Surplus PRICE (Dollars per ton) 340 330 Producer Surplus 320 310 300 290 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of pears)Based on the information from the previous graph, absent international trade total surplus is $ The following graph shows the same domestic supply and demand curves for pears in Guatemala. Now, suppose that the Guatemalan government changes its stance on international trade, deciding to allow free trade in pears. The horizontal black line (Pw ) represents the world price of pears at $350 per ton. Assume that Guatemala's entry into the world market for pears has no effect on the world price and there are no transportation or transaction costs associated with international trade in pears. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus. 390 Domestic Demand Domestic Supply 380 Consumer Surplus 370 360 350 Producer Surplus PW PRICE (Dollars per ton) 340 330 320 310 300 290 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of pears)When Guatemala adjusts its trade policy to allow free trade of pears, the price of one ton of pears in Guatemala becomes $350. At this price, tons of pears will be demanded in Guatemala, and tons will be supplied by domestic suppliers. Therefore, Guatemala will export tons of pears. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade Without Free Trade (Dollars) (Dollars) Consumer Surplus Producer Surplus When Guatemala allows free trade, the country's producer surplus by $ , and consumer surplus by $ .Therefore, the net effect of allowing international trade on Guatemala's total surplus is a of