Question 2 [25 marks] A country decides to expand its local production of an intermediate product needed for the local production of a final good under perfect competition. For this purpose, the government is considering to introduce either an import quota on imports of the intermediate product or a Domestic Content Requirement (DCR). Both measures aim at reducing imports of the intermediate product and promoting local production. Discuss the strengths and weaknesses of both policy options in terms of welfare gains/losses. Draw a figure representing the domestic market for components (in the plane price of components - quantity of components), explain all demand and supply curves and show what happens with the free-trade equilibrium after the introduction of a DCR. Conclude by recommending one of the policy options and explaining why one of the policy options is superior. [25]