1. Suppose Home is a small country and instead of a tariff, Home applies an import quota limiting the amount foreign can sell to 2 units. Use the graphs below to answer the questions Price Price S 14 A D M 2 4 5 6 8 Quantity 2 6 Import (a) Home market (b) Import market a. Determine the net effect of import quota on the Home economy if the quota licenses are allocated to local producers Consumer surplus: Producer surplus: Quota rents earned at Home: Net effect on Home welfare b. Calculate the net effect of the import quota on Home's welfare if the quota rents are earned by foreign exporters Consumer surplus: Producer surplus: Quota rents earned at Home: Net effect on Home welfare c. With an import quota of 2 units the net effect on Home welfare is equivalent to that of a tariff of $2. Rank the following in ascending order of Home welfare and justify your answers. If two items are equivalent, indicate this accordingly a. Tariff of f in a small country corresponding to the quantity of imports M. b. Quota with the same imports M in a small country, with quota licenses distributed to Home firms and no rent secking. c. Quota of M in a small country with quota licenses auctioned to Home firms. d. Quota of M in a small country with the quota given to the exporting firms. e. Quota of M in a small country with quota licenses distributed to rent-seeking Welfare in ascending order is as