Problem: 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.
Q1. Determine the equilibrium price and quantity under free trade.
Q2. Determine the equilibrium price and quantity when foreign firms are constrained by a 100-unit quota.
Q3. Are domestic consumers better or worse off as a result of free trade?
Q4. Are domestic producers better or worse off as a result of the quota?