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What is the effect of an import quota on the supply and price of domestic sugar?

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The domestic demand and supply for sugar are Qd = 40,000 - 200 P and QSD = 10,000 + 300 P. The foreign supply is QSF = 20,000 + 100 P. What is the total supply of sugar in the domestic market? What is the domestic market price of sugar? Suppose an import quota of 5,000 is imposed in the domestic market. What will be the new market price of sugar? How many units of sugar will domestic produces supply after the quota is imposed?

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Solution Summary

This solution provides calculations for the original price, price after the quota is imposed and new domestic supply after the quota.

Solution Preview

Total Sugar Supply = Domestic Supply + Foreign Supply
= 10,000 + 300P + 20,000 + 100P

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