Determine the free trade equilibrium

Reference no: EM131134904

The nation of Acirema is "small" and unable to affect world prices. It imports peanuts at the price of $10 per bag. The demand curve is

D = 400 - 10P.

The supply curve is

S = 50 + 5P

Determine the free trade equilibrium. Then calculate and graph the following effects of an import quota that limits imports to 50 bags.

a. The increase in the domestic price.

b. The quota rents.

c. The consumption distortion loss.

d. The production distortion loss.

Reference no: EM131134904

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