Refer to the information provided in Figure 20.4 below to answer the question(s) that follow. Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic production is
A) 0.
B) 100.
C) 150.
D) 300.

Question

Refer to the information provided in Figure 20.4 below to answer the question(s) that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. With free trade domestic production is
A) 0. 
B) 100. 
C) 150. 
D) 300.

Quizplus · Accepted Answer

With free trade, the domestic price of a leather wallet aligns with the international price, which is $10. Domestic producers will still produce goods as long as the price covers their marginal cost. The exact quantity produced domestically depends on the supply and demand dynamics at the $10 price point. Since none of the other options are viable without additional context, and assuming production doesn't completely cease, option B (100) is chosen as a placeholder for some level of domestic production.

Refer to the Information Provided in Figure 20