The following graph shows the demand for and the supply of a good in a country.If the world price of the good is $2.00 per unit and an import quota of 50 units per month is imposed,then:
Figure 17.6

Question

The following graph shows the demand for and the supply of a good in a country.If the world price of the good is $2.00 per unit and an import quota of 50 units per month is imposed,then:​ ​
Figure 17.6
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Quizplus · Accepted Answer

At a world price of $2.00 per unit, the quantity demanded in the domestic market is 200 units (point A) and the quantity supplied domestically is 100 units (point B). Therefore, without any trade restrictions, 100 units would be imported (point C). If an import quota of 50 units per month is imposed, domestic producers will increase their production to meet the demand. As a result, the domestic supply curve will shift upward from point B to point E. At a price of $2.00 per unit, domestic production will increase from 100 to 125 units per month (point E). Therefore, choice (D) is the correct answer.

The Following Graph Shows the Demand for and the Supply