Use the following figure to answer the questions : Figure 10-5 shows the domestic U.S.market for bananas and the global market for bananas.The domestic supply curve is given by SUPPLY US .With free trade,the equilibrium output in the U.S.market is Q.The import quota imposed by the government is equal to 0A.
-Refer to Figure 10-5.Which of the following should necessarily be true in the absence of a quota?
A)EH = 0C + CQ
B)EH = 0Q
C)0Q = 0Q'
D)0A + BC = FG

Question

Use the following figure to answer the questions : Figure 10-5 shows the domestic U.S.market for bananas and the global market for bananas.The domestic supply curve is given by SUPPLY US .With free trade,the equilibrium output in the U.S.market is Q.The import quota imposed by the government is equal to 0A. 
-Refer to Figure 10-5.Which of the following should necessarily be true in the absence of a quota?
A)EH = 0C + CQ 
B)EH = 0Q 
C)0Q = 0Q' 
D)0A + BC = FG

Quizplus · Accepted Answer

In the absence of a quota, there would be free trade, and the U.S. market would be in equilibrium with the global market. This means that the domestic price would be equal to the world price, and the domestic quantity demanded and supplied would be equal to the global quantity demanded and supplied. Therefore, the equilibrium output in the U.S. market would be Q, which is also the intersection point of the domestic demand and supply curves. At this point, the domestic price would be EH and the global price would be 0Q, which implies that EH = 0Q.

Use the Following Figure to Answer the Questions : Figure