Suppose that the domestic demand and supply for hats in a small open economy

| February 14, 2018

Suppose that the domestic demand and supply for hats in a small open economy are given by.transtutors.com/qimage/image06092015281.png” alt=””>where Q denotes quantity and P denotes price. a. If the world price is 10, what is the free trade level of imports?b. Suppose that the country imposes a quota of 11 units. How much will the domestic price rise?c. What will be the welfare effects on this country of a quota of 11 units?d. Suppose instead that this country negotiates a VER of 11 units with its chief foreign supplier. What are the welfare effects of this policy?

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