. A small country imports sugar. With free trade, the world price of sugar is $0.20 per pound. The country’s national market for sugar with free trade is:
-Domestic production: 120 million pounds/year
-Domestic consumption: 420 million pounds/year
-Imports: 300 million pounds/yea.The country’s government now decides to impose a quota that limits sugar imports to 240 million pounds per year. With the import quota in effect, the domestic price rises to $0.24 per pound, and domestic production rises to 160 million pounds/year. The government auctions the import licenses for the 240 million pounds of imports.
I’m trying to figure out how calculate how much the government receives for the auction for the import licenses and the net national gain or loss in surplus in the small country from the quota