Omg that's completely different to what I thought, can you explain how?
Hi!
Background Info
A quota is defined as a restriction on the amount/value of a good that may be imported.
The amount of imports is the difference between the quantity that domestic businesses can supply, and the quantity that is demanded.
So before the quota was implemented, the quantity that domestic producers supplied was 1000, whereas the quantity demanded was 5000. The amount of imports is 5000-1000 = 4000.
At the new price of $12, the quantity that domestic producers supplied is 2000, whereas the quantity demanded is 4000. The amount of imports is 4000-2000 = 2000.
At the old price, overseas producers could supply 4000, but at the new price, overseas producers can only supply 2000. Therefore, the quota is 2000 (maximum value they could supply).
Hope this makes sense!