The diagram below shows the demand and supply curves for refrigerators in Canada.
FIGURE 34- 1
-Refer to Figure 34- 1,and assume the world price is P0.The Canadian government now imposes an import quota of the amount Q2Q4.The result would be that the price in Canada would:

Question

The diagram below shows the demand and supply curves for refrigerators in Canada.
  FIGURE 34- 1
-Refer to Figure 34- 1,and assume the world price is P0.The Canadian government now imposes an import quota of the amount Q2Q4.The result would be that the price in Canada would:

Quizplus · Accepted Answer

With the imposition of an import quota, the supply of refrigerators in Canada will decrease from Q1Q2 to Q2Q4, resulting in a new equilibrium point at the intersection of the demand curve and the new supply curve. This new equilibrium price will be P1, which is higher than the world price of P0. At this higher price, the quantity demanded will decrease from Q3 to Q4. Therefore, the correct choice is C: rise to P1 and consumption would decrease to Q4.

The Diagram Below Shows the Demand and Supply Curves for Refrigerators