Asked by Paola Diogene on Jul 01, 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,the import quota that would least affect the level of imports in this country is_____.
A) $3.00 per unit
B) $2.00 per unit
C) 50 units per month
D) 100 units per month
E) 150 units per month
Import Quota
A government-imposed limit on the quantity or monetary value of a certain good or category of goods that can be imported into a country.
World Price
The international market price at which goods, services, or commodities are traded across countries.
- Acquire knowledge about the consequences of import restrictions for the local market, particularly in terms of the impact on prices, volume, and state earnings.
Verified Answer
RL
Robert LenentineJul 02, 2024
Final Answer :
D
Explanation :
At the world price of $2.00 per unit, the level of imports in this country would be the difference between the quantity demanded (Qd) and the quantity supplied domestically (Qs), which is 100 units per month [(80-40)=40 and (140-40)=100].
To least affect the level of imports, the import quota should be set at 100 units per month, which is equal to the level of imports at the world price. Thus, the answer is D.
To least affect the level of imports, the import quota should be set at 100 units per month, which is equal to the level of imports at the world price. Thus, the answer is D.
Learning Objectives
- Acquire knowledge about the consequences of import restrictions for the local market, particularly in terms of the impact on prices, volume, and state earnings.