Can I get some help on this question? It's about analyzing the effect of using import quota for a small open economy. It asks to calculate the net welfare effect of the quota (first best policy and second best policy). The following question is about analyzing the effect of using import quota for a small open economy where its local demand and supply for product Y are given by D 100 P and S = P with the price of product Y in the world market being $20. Now assume that the domestic production of product Y generates a positive externality worthy of $40 per unit. Now based on this new information, calculate the net welfare effect of the quota of limiting the amount of imported product Y by 30 units. The net welfare effect of the quota = Derivation: Base on this new information, is the quota a desirable policy for this economy? (Yes) or (No) The quota described above is known as a "second-best policy." Then, what would be the "first-best policy" to correct the market failure? Propose a type of policy instrument that the government should use and also calculate the level of policy instrument that maximizes the social welfare. The first-best policy: The level of policy instrument that maximizes the social welfare = Derivation: The net welfare effect of the proposed first-best policy= Derivation:
