(Global Trade Policy Questions and Answers) For this case study, read the applied problems 7-1 and 7-8 on page 160 of the textbook. Answer both questions using a chart and quantitative explanations, as well as written arguments. To complete this assignment, review cases 7.2.2 and 7.2.3, which start on page 153. Follow the explanations and the charts. Instead of using letter symbols in the chart, use actual numbers. For example: Instead of using world Price PW uses real numbers, such as $10.

1. Examine the effects of liberalizing import quotas on prices, quantities supplied, quantity demanded, and trade in both importers and exporters. Make an assumption about whether your countries can affect the world price.

2. Consider the case where a country imposes a complete ban on all trade (imports and exports) Examine the effect of this ban on the welfare of that country.

  
 
 

Global Trade Policy An import quota is a limit or a restriction on the quantity of a good that is produced abroad and sold domestically through importation. An import quota is protectionist trade restriction that sets a limit on the quantity of a good sold domestically in a given period (Smith, P. J. 2013). Less is imported if a quota is applied on a good. It benefits the producers of a good at the expense of all the consumers of the commodity in the economy. The goal of the import quota is to reduce imports and increase domestic production of goods and services which as a result will protect domestic production by restricting foreign competition. Effects of import quota Since the import quota prevents the domestic consumers from buying an imported good, the supply of this good can no longer be perfectly elastic at the world price (Smith, P. J. 2013). As long as the price of the good is above the world price, you can import as much as you are permitted to import and the total supply of the good tend to be equal to the domestic supply plus the amount of the import quota. The price of the good to balance supply and demand. The import quota causes the price of the good to rise above the world price. The foreign quantity demanded falls and the domestic.