Asked by Amanda Sammons on Jun 27, 2024
Verified
The following graph shows the demand for and the supply of a good in a country.If the world price of the good is $2.00 per unit and an import quota of 50 units per month is imposed,then:
A) domestic production will increase from 100 to 200 units per month.
B) imports will increase from 25 to 50 units per month.
C) domestic production will increase from 100 to 175 units per month.
D) domestic production will increase from 100 to 125 units per month.
E) domestic production will increase from 100 to 150 units per month.
World Price
The price of a good or service on the international market, dictated by the global balance of supply and demand.
Import Quota
A government-imposed limit on the quantity or monetary value of a certain good that can be imported into a country.
Domestic Production
The total value of all goods and services produced within a country's borders.
- Outline the procedures and outcomes associated with trade policies, namely tariffs, quotas, and free trade treaties.
Verified Answer
JR
Jayla RichardsJun 27, 2024
Final Answer :
D
Explanation :
At the world price of $2.00 per unit, the quantity demanded is 200 units and the quantity supplied is 125 units. With an import quota of 50 units per month, domestic producers can increase their production to a maximum of 125 + 50 = 175 units per month, which is still below the quantity demanded. Therefore, domestic production will increase from 100 to 125 units per month.
Learning Objectives
- Outline the procedures and outcomes associated with trade policies, namely tariffs, quotas, and free trade treaties.