Exhibit 19-8 If the country in Exhibit 19-8 is initially trading without restrictions at a world price of $2.00 and an import quota of 50 units per month is enacted,

Question

Exhibit 19-8  If the country in Exhibit 19-8 is initially trading without restrictions at a world price of $2.00 and an import quota of 50 units per month is enacted,

Quizplus · Accepted Answer

Before the quota, domestic producers were producing 100 units and domestic consumers were buying 75 units at a price of $2.00. With the quota of 50 units, domestic producers can now sell an additional 25 units to meet the quota limit. Therefore, domestic production will increase from 100 to 125 units per month. Since the quota limit is equal to the previous import amount, imports will now be zero. Thus, the correct answer is D.

Exhibit 19-8 If the Country in Exhibit 19-8 Is