shoe producers. Draw the diagram as in Study Exercise 5 and
answer the following questions.
a. Explain why an import quota of raises the domestic
price to.
b. With import quotas, the Canadian government earns no
tariff revenue. Who gets this money now?
c. Is the import quota better or worse than the tariff for
Canada as a whole? Explain.
7. Under pressure from the Canadian and U.S. governments in the
early 1980s, Japanese automobile producers agreed to restrict
their exports to the North American market. After the formal
agreement ended, the Japanese producers decided unilaterally to
continue restricting their exports. Carefully review Figure 33-2
and then answer the following questions.
a. Explain why the Japanese producers would voluntarily
continue these restrictions.
b. Explain why an agreement to export only 100 000 cars to
North America is better for the Japanese producers than a
North American tariff that results in the same volume of
Japanese exports.
c. Who is paying for these benefits to the Japanese
producers?
8. Consider a mythical country called Forestland, which exports a
large amount of lumber to a nearby country called Houseland.
The lumber industry in Houseland has convinced its federal
government that it is being harmed by the low prices being
charged by the lumber producers in Forestland. You are an
Q 3 Q 4
pw+t