Refer to the figure above. The graph represents consumers and suppliers in a country that relies on imports. Curve D is domestic demand, Curve S is domestic supply and Curve I is the import supply curve. The import supply curve is horizontal because
A) the world produces a relatively small amount of this good.
B) no matter how much this country buys, their demand does not impact world price.
C) this is a renewable good, for which there is no shortage.
D) all of the above.

Question

Quizplus · Accepted Answer

The import supply curve is horizontal because the country relies on imports from the world market and, therefore, their demand does not impact the world price. This means that no matter how much the country buys, the price will not increase. Choices A and C are incorrect because they provide irrelevant or incorrect information.

Refer to the Figure Above