ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Reservation Policy for Small Industry

limit approaches AD, where the equilibrium reverts to the free trade scenario as the monopolist finds it more profitable to supply AC to the domestic market. If transport costs are arbitrarily small, this occurs when the quota is arbitrariIy close to AD, and we can ignore it for practical purposes.

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