The table below shows the demand and supply for nuts in two

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The table below shows the demand and supply for nuts in two countries: Cape Verde and Indonesia. Use the information in the table provided to answer the questions below. Indonesia imposes an import quota on nuts from Cape Verde, limiting imports to 40 pounds. How is this quota likely to affect the price of nuts in Indonesia Using free trade as the starting point, how will this quota affect consumers and producers in Cape Verde

Solution

1. The price will be higher than free trade levels, but lower than when no trade exisred.

2. Only producers will benefit, consumers will not benefit.