Suppose the market for a good is expressed as follows: Inverse demand: P = 200 - 2Q Inverse supply: P = 2Q What is the equilibrium if the government imposes a supply quota of 75 units? What is the equilibrium if the government imposes a supply quota of 25 units?
What will be an ideal response?
The market equilibrium with no quota is P = $100 and Q = 50 units. A supply quota of 75 units is not binding so the equilibrium is unchanged. A supply quota of 25 units will change the supply curve. The new supply curve will be the same as the no quota supply curve until 25 units and then it will be vertical. The new equilibrium is P = $150 and Q = 25 units.
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Realization of gains from trade, entrepreneurial discovery, and investment are largely dependent on
a. competitive elections and political democracy. b. the presence of institutions and policies consistent with economic freedom. c. the use of tariffs and quotas to protect domestic businesses from competition with foreigners. d. the use of government planning to direct investments into worthwhile projects.