Due to loss of competitiveness brought on by appreciation of the exchange rate and the high production costs, U.S. government reduce the export (or limit the supply of domestic producers) by imposing an export quota of 20 billion units per year. What happens to U.S. price of semiconductors, the quantity of semiconductors bought by U.S. people, and the quantity of semiconductors exported? [hint: use equation to calculate the equilibrium]
Due to loss of competitiveness brought on by appreciation of the exchange rate and the high production costs, U.S. government reduce the export (or limit the supply of domestic producers) by imposing an export quota of 20 billion units per year. What happens to U.S. price of semiconductors, the quantity of semiconductors bought by U.S. people, and the quantity of semiconductors exported? (hint: use equation to calculate the equilibrium) (3 marks)
Answer:
According to the question the USA impose a export quota on semiconductors and and imposing an export quota of 20 billion units per year.
Export Quota:
Export quota is a restriction imposed by a government on the amount or number of goods or services that may be exported within a given period.
The objectives of export quota: The benefits of the export quota are following as-
1. The country impose export quota to reduce and control the price level of the products that is mostly important for its citizen welfare like, medicines.
2. Control the price of those inputs or raw materials that is vital for the domestic producers/industry.
3. Some time country impose it to make the international trade more favorable.
Impact of export quota:
Its reduce the export level, price level in domestic market and increase the domestic demand at lower price.
Impact on the USA market of export quota on semiconductors:
So, when government will impose export quota on semiconductors then it will increase the supply of semiconductors in domestic market that will decrease the price level, decreasing price will increase the demand of semiconductors. It will decrease the quantity of export for semiconductors in international trade also.
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