#AP Microeconomics: International Trade & Public Policy 🌎

Hey! Let's get you prepped for the AP Microeconomics exam. This guide focuses on international trade, specifically quotas and tariffs, and how they impact markets. We'll break it down so you're feeling confident and ready to ace this!

#Introduction to International Trade and Public Policy

International trade is all about countries buying and selling goods and services with each other. It's a big deal because it:

• Expands markets for businesses.
• Increases variety of goods for consumers.
• Boosts competition, which usually means lower prices. 💡

Public policy refers to the laws and regulations that governments use to manage the economy. When it comes to international trade, policies like quotas and tariffs are super important. Think of them as tools that governments use to influence how much trade happens. For example, the United States trades a lot with China, Canada, and Mexico because it's often cheaper to import certain goods than to make them at home.

#Trade Quotas

A quota is a limit on the quantity of a good that can be imported into a country. It's like saying, "We'll only allow this much of that product to come in." Governments use quotas to protect domestic industries from foreign competition. It's a way to give local businesses a leg up, but it can also lead to higher prices for consumers.

#Understanding Quota Graphs

Let's look at a typical quota graph:

• P_E and Q_E: These are the equilibrium price and quantity before the quota is introduced. It's where supply and demand meet naturally.
• Q_Q: This is the quota limit. It's the maximum quantity of the good that can be imported.
• P_Q: This is the new price after the quota is in place. Notice it's higher than P_E.
• S_q: This is the supply curve after the quota. It's perfectly inelastic because the quantity is fixed by the quota.
• Consumer Surplus: The green triangle represents the benefit consumers get from buying the good at a price lower than they'd be willing to pay.
• **Producer S...