Question
4. Reconsider the US car market with no quota on imported cars. Now, imagine that a foreign enemy drops a bomb on the major port
4. Reconsider the US car market with no quota on imported cars. Now, imagine that a foreign enemy drops a bomb on the major port in Los Angeles, which reduces the US capacity to receive imported cars (they are unable to unload ships at the dock) by 50%. Show the following on a diagram of the US car market: a. The reduction in imports b. The loss (of consumer surplus) to US consumers c. The gain (of producer surplus) to US car manufacturers d. Deadweight loss e. Looking at your answers to questions 4 and 5, what do you conclude about the effectiveness of a policy that imposes restrictions on imports? Will you draw out a diagram for me on a sheet of paper with labels?
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