Author Question: The U.S. is planning on imposing quotas on tires imported from china. Domestic retailers predict ... (Read 78 times)

pepyto · **on:** Jul 1, 2018

The U.S. is planning on imposing quotas on tires imported from china. Domestic retailers predict this will result in an increase in consumer prices on tires by about 10.

Use a supply and demand graph with brief explanation to show the effects of an import quota. Assume the quota is binding.

Question 2

Which of the following is a necessary condition for government subsidies to influence a firm to choose an output level as if it were a Stackelberg leader?

A) The subsidy must be announced before the firms choose output levels.
B) The subsidy must be equal to the firm's marginal cost.
C) The subsidy must be equal to the firm's rival's marginal cost.
D) The firm does not have any fixed costs.

Jmfn03 · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

The restriction on imports will shift back the supply curve as less imports will be allowed into the country. This will raise the price and lower the quantity.

Answer to Question 2

A