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1. The Home country is small and unable to affect world prices. It imports peanuts at a price of$10 per bag. The demand curve is

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1. The Home country is small and unable to affect world prices. It imports peanuts at a price of$10 per bag. The demand curve is D = 400 -lOP and the supply curve is S = 50 + 5P. a. Determine and show on a graph the free trade equilibrium. b. Determine and show graphically the impact of imposing an import quota of 50 bags of peanuts. In particular, graph and determine the impact on: domestic price; quota rents; consumption distortion; production distortion

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