The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1. $\begin{array}{|c|c|c|}
\hline\text { Ouantity }&&\text { Ouantity }\
(\text { Supplied }&&\text { Demanded }\
\hline \text { (Domestic) } & \text { Price } & \text { (Domestic) } \
\hline 12 & \$ 5 & 2 \
\hline 10 & 4 & 4 \
\hline 7 & 3 & 7 \
\hline 4 & 2 & 11 \
\hline 1 & 1 & 16 \
\hline
\end{array}$ With a $1-per-unit tariff, price and total quantity sold will be

Question

Quizplus · Accepted Answer

With a $1-per-unit tariff, the new domestic price would be the world price plus the tariff, which is $2 ($1 + $1).

Looking at the table, at a price of $2, the quantity supplied by domestic producers is 4 units and the quantity demanded by domestic consumers is 11 units.

However, since the production cost for domestic producers is higher than the world price, they will only supply 4 units at $2. The rest of the demand will have to be met by imports.

So, the total quantity sold will be 4 domestic units + (11-4) imported units = 11 units.

And the price will be $2, the world price plus the tariff.

Therefore, the correct choice is D: $2 and 11 units.

The Accompanying Table Gives Domestic Supply and Demand Schedules for a Product