Question

Consider a competitive market served by many domestic and foreign firms. the domestic demand for these firms' product is qd = 600 – 2p. the supply function of the domestic firms is qsd = 200 + p, while that of the foreign firms is qsf = 250.
a. determine the equilibrium price and quantity under free trade. equilibrium price: $ equilibrium quantity: units
b. determine the equilibrium price and quantity when foreign firms are constrained by a 100-unit quota. equilibrium price: $ equilibrium quantity: units
c. are domestic consumers better or worse off as a result of the quota? worse off better off neither better nor worse off
d. are domestic producers better or worse off as a result of the quota? worse off neither better nor worse off better off

Answer 1

Answer:

a decrease in equilibrium price and an increase in equilibrium quantity