Figure 9.9
-Refer to Figure 9.9. Now suppose an import quota of 3000 trucks is imposed. The quota will decrease the revenue of foreign firms by
A) $0.
B) $2,500.
C) $7,500,000.
D) $11,250,000.
E) $13,125,000.

Question

Figure 9.9
-Refer to Figure 9.9. Now suppose an import quota of 3000 trucks is imposed. The quota will decrease the revenue of foreign firms by
A) $0. 
B) $2,500. 
C) $7,500,000. 
D) $11,250,000. 
E) $13,125,000.

Quizplus · Accepted Answer

With the quota of 3000 trucks, the quantity now demanded by the domestic market is at point B (3000, $25,000). The price has increased to $25,000 and the total revenue gained by foreign firms is now equal to the rectangle formed by points A, B, C, and D, which is equal to $37,500,000. Comparing this revenue with the revenue earned without the quota, the decrease in revenue of foreign firms is $50,625,000 - $37,500,000 = $11,250,000. Therefore, the correct answer is D.

Figure 9.9 -Refer to Figure 9.9. Now Suppose an Import Quota of Quota