-Refer to Exhibit 34-12.P_W is the price that exists in a free world market.With the imposition of a quota that limits imports to Q₄ - Q₃,consumers lose more than producers and importers gain.The result of the quota is a (net) loss represented by the area(s)

Question

-Refer to Exhibit 34-12.P<sub>W</sub> is the price that exists in a free world market.With the imposition of a quota that limits imports to Q<sub>4</sub> - Q<sub>3</sub>,consumers lose more than producers and importers gain.The result of the quota is a (net) loss represented by the area(s) A) LGK + JHI. B) KGHJ. C) GCH + JHI. D) LGK. E) none of the above

Quizplus · Accepted Answer

The net loss from the quota is represented by the deadweight loss areas, which are typically the triangles that represent the loss in consumer and producer surplus that is not offset by gains elsewhere. In this context, LGK + JHI represents the deadweight loss due to the quota.