Figure 9-25
The following diagram shows the domestic demand and supply in a market.Assume that the world price in this market is $10 per unit.
-Refer to Figure 9-25.With free trade and a $5 per unit tariff,the country
A)exports 20 units of the good.
B)imports 20 units of the good.
C)exports 40 units of the good.
D)imports 40 units of the good.

Question

Figure 9-25
The following diagram shows the domestic demand and supply in a market.Assume that the world price in this market is $10 per unit. 
-Refer to Figure 9-25.With free trade and a $5 per unit tariff,the country
A)exports 20 units of the good. 
B)imports 20 units of the good. 
C)exports 40 units of the good. 
D)imports 40 units of the good.

Quizplus · Accepted Answer

With a world price of $10 per unit, the domestic supply is only willing to produce 20 units, while domestic demand is willing to purchase 60 units. Without any government intervention, the country would import 40 units to meet the excess demand. However, with a $5 per unit tariff, the domestic price would increase to $15 per unit, which would incentivize domestic suppliers to produce more, resulting in a domestic supply of 40 units. This would still not be enough to meet domestic demand, so the country would import an additional 20 units, bringing the total imports to 40 units. Thus, the country would import 40 units of the good.

Figure 9-25 the Following Diagram Shows the Domestic Demand and Supply in Supply