Exhibit 19-7
-Suppose that the world price in Exhibit 19-7 is $2.00 per unit. What is the smallest import quota that would not affect the level of imports in this country?

Question

Exhibit 19-7 
-Suppose that the world price in Exhibit 19-7 is $2.00 per unit. What is the smallest import quota that would not affect the level of imports in this country?

Quizplus · Accepted Answer

To find the smallest import quota that would not affect the level of imports, we need to look at the domestic demand and supply at the world price. At $2.00 per unit, the domestic demand is 150 units and the domestic supply is 50 units. This means that the country is importing 100 units (150-50). Therefore, the smallest import quota that would not affect the level of imports would be 100 units per month, which is equal to the current level of imports. If we set the quota at 100 units per month, it would allow the country to continue importing the same amount as before, and the domestic market would still be in equilibrium at the world price.

Exhibit 19-7 -Suppose That the World Price in Exhibit 19-7 Is $2.00