A quota and an equivalent tariff that permit

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For a small country, consider a quota and an equivalent tariff that permit the same initial level of imports. The market is competitive, and the government uses fixed favoritism to allocate the quota permits, with no resources expended in the process. There is now an increase in domestic demand (the domestic demand curve D d shifts to the right). If the tariff rate is unchanged, and if the quota quantity is unchanged, are the two still equivalent? Show this using a graph.

Be sure to discuss the effects on domestic price, production quantity, and consumption quantity, on import quantity, and on producer surplus, consumer surplus, deadweight losses, and government revenue or its equivalent for the quota.

Reference no: EM131212489

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