Thanks a lot.

Suppose there are two countries, Home and Foreign, and two goods, crumpets and tea, produced using only labour. Firms in Home have unit labour cost 1 for crumpets, and 2 for tea; Foreign firms have unit labour cost 2 for crumpets and 3 for tea. Both countries have the same labour force L and share the same preferences; demand for good 9 : at in country j : H, F is 55-; : Yj/(2pg), where Yj is country j's income. Prices for goods are p6 and pt, but normalise pa : 1. a) Suppose there is free trade of goods and show that the world market price for tea is p: : 2 and derive the production, imports and exports, and wages in each country. b) Home considers introducing a quota on imported tea of L/12. Determine the new supplies of tea and crumpets in Home and Foreign and show that in equilibrium consumer prices are p? : 2 and pf : 7/4. c) Given the new equilibrium, will the quota boost Home's tea output? How will wages and consumption change in Home and in Foreign? Will output in Home increase?| Explain the effect of the quota on the world market