Price of peanuts in the world market is $12 per bag.

Country A has demand curve D=450-10P

and supply curve S=50+10P. Suppose Country A is a small country and imposes an import quota
on peanuts that limits the imports to 100 bags.

With the import quota of 100 bags, what is the change of consumer surplus compared with free
trade?

(a) -945
(b) 945
(c) -450
(d) -725
Using information from above, with the import quota of 100 bags, what is the change of
producer surplus compared with free trade?

(a) 255
(b) -120
(c) 450
(d) 555

Using information from above, with the import quota of 100 bags, what is the change of total
welfare change from free trade (assume that quota rent is going to country A)?

(a) -120
(b) -100
(c) -90
(d) -690

Using information from above, find the tariff that will limit the imports also to 100 bags and
express it in two ways: specific tariff and ad volarem tariff, respectively

(a) $4.5 per unit or 32.5% of the value

(b) $4 per unit or 30% of the value
(c) $3 per unit or 25% of the value
(d) $3 per unit of 20% of the value

Using information from above, now suppose country A imposes a tariff of $3 per unit. Also
assume country A is a LARGE country. This tariff policy decreases the world market
equilibrium price to $10. Now calculate the change of consumer surplus from free trade.
(a) -945
(b) 945
(c) -450
(d) -325

Using the same information from above, calculate the change of producer surplus with a tariff of
$3 per unit from free trade.

(a) -245
(b) 245
(c) 250
(d) 175

Using the same information from above, calculate the change of total welfare with a tariff of 3
per unit from free trade.

(a) 245
(b) 270
(c) 200
(d) -175