Consider a competitive market served by many domestic and foreign firms. The domestic demand for these firms' product is Qd = 500-1.5P. The supply function of the domestic firms is Qsd =50 + 0.5P, while that of the foreign firm 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 the quota?
d. Are domestic producers better or worse off as a result of the quota?