Determine consumer surplus and producer surplus

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The table given below are the demand and supply schedules for television sets in Venezuela, a "small" country that is unable to affect world prices.

Price per TV set Quantity Demanded Quantity Supplied
$100 900 0
200 700 200
300 500 400
400 300 600
500 100 800

a. Assume Venezuela imports TV sets at a price of $150 each. Under free trade, how many sets does Venezuela produce, consume, and import? Find Venezuela’s consumer surplus and producer surplus.

b. Suppose that Venezuela imposes a quota that limits imports to 300 TV sets. Determine the quota-induced price increase and the resulting decrease in consumer surplus. Calculate the quota's redistributive effect, consumption effect, protective effect, and revenue effect. Assuming that Venezuelan import companies organize as buyers and bargain favorably with competitive foreign exporters, what is the overall welfare loss to Venezuela as a result of the quota? Suppose that foreign exporters organize as a monopoly seller. What is the overall welfare loss to Venezuela as a result of the quota?

 

 

Reference no: EM1374487

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