ABNORMAL BEAUTYY. Class Exercise Name Jocelyn Tavares Import Quota 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 X 14 PC=89 -................. ............" 6 4 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. ((8) ( 18-4 ) = $48 2 ( 6 * 18-8 ) = $30 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: 50 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 $_ Page 1