Question: Consider a competitive market served by many domestic and foreign firms. The domestic demand for these firm's product is Qd=500-1.5P. The supply function of the domestic firms is Qsd=50+.5P, while that of the foreign firms is Qsf=250.
A) Determine the equilibrium price and quantity under free trade.
B) Determine the equilibrium price and quantity when foreign firms are constrained by a 100-unit quota.
C) Are domestic consumers better or worse off as a result of free trade?
D) Are domestic producers better or worse off as a result of the quota?