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Author Question: Use a graph to demonstrate why quotas are likely to cause increased deadweight losses over time. ... (Read 141 times)

cartlidgeashley

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on: Jun 30, 2018
Use a graph to demonstrate why quotas are likely to cause increased deadweight losses over time.
 
  What will be an ideal response?

Question 2

Because of China's growth, natural resources
 
  A) are in greater demand, but that demand is mostly going to the previously industrialized nations so it is having little effect on economic development in developing countries.
  B) are in greater demand and the natural resources are increasingly coming from developing countries.
  C) prices are falling since China has tremendous negotiating power.
  D) are not in high demand since labor and capital are the emphasized inputs in Chinese manufacturing.
International Economics ¦ Gerber ¦ 6th Edition
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dyrone

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Over time, demand for most goods rises, as populations increase (as well as for other reasons). The graph should show an increase in demand, given a constant quota amount. Since the quota does not change, the effect of the quota will be to raise price even more than previously. This increases the size of the deadweight loss due to underconsumption of the good and increase the deadweight loss due to domestic overproduction.

Answer to Question 2

B


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cartlidgeashley

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Reply #2 on: Jun 30, 2018
Correct answers!


dyrone

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Reply #3 on: Jun 30, 2018
Great! Please up vote :D


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