Exhibit 19.3

-Refer to Exhibit 19.3,which shows the supply of a product in the United States.If the government establishes a sugar quota of Q to Q',the supply curve combining U.S.production and imports becomes _____ at the world price of _____ and remains horizontal until the quantity supplied reaches _____.

Question

Exhibit 19.3
 
-Refer to Exhibit 19.3,which shows the supply of a product in the United States.If the government establishes a sugar quota of Q to Q',the supply curve combining U.S.production and imports becomes _____ at the world price of _____ and remains horizontal until the quantity supplied reaches _____.

Quizplus · Accepted Answer

When the government establishes a quota, the supply curve becomes vertical from Q' to the right, meaning that the quantity supplied remains constant at Q'. The world price remains the same at P, but the U.S. price increases to P', which is higher than the world price to reflect the reduced supply caused by the quota. Thus, the supply curve is horizontal until it reaches the quota quantity of Q'.

Exhibit 19.3 -Refer to Exhibit 19.3,which Shows the Supply of a Product