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Consider a small open economy. Suppose the market for corn in Banana Republic is competitive. The...

Consider a small open economy. Suppose the market for corn in Banana Republic is competitive. The domestic market demand function for corn is Qd = 10 − 0.5P and the domestic market supply function is Qs = P − 2, both measured in billions of bushels per year. Also assume the import supply curve is infinitely elastic at a price of $4 per bushel. Suppose the government impose an import quota such that the domestic equilibrium price is P Q = 6. What is the domestic consumer surplus? domestic producer surplus? Foreign producer surplus? dead weight loss? Show all of these numerically and graphically.

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