How many quota units would it sell to achieve this objective

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The domestic market for cheese is given by P = 108-2Q and P = 16+ (1/4)Q. These are the demand and supply conditions. The good can be supplied internationally at a constant price P = 20.

(a) Illustrate the domestic market in the absence of trade and solve for the equilibrium price and quantity.

(b) With free trade illustrate the market graphically and compute the total amount purchased, and the amounts supplied by domestic and international suppliers.

(c) Suppose now that the government wanted to maintain a minimum price in the market of $28 and it decided to do this by selling quotas to suppliers from any source. How many quota units would it sell to achieve this objective?

Reference no: EM131072174

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