Refer to Figure 35.6: If S₁ represents the U.S. domestic supply of a good, what does S₂ most likely represent? A) U.S. supply under tariff-restricted trade. B) U.S. supply under quota-restricted trade. C) The result of a foreign country dumping this good on the U.S. market. D) Production possibilities under conditions of free trade.

Question

Quizplus · Accepted Answer

S₂ represents the U.S. supply under quota-restricted trade because it shows a decrease in the quantity supplied at every price level compared to S₁. This indicates that there is a quota placed on the amount of the good that can be produced or imported into the U.S., leading to a decrease in supply.