Refer to the graph shown for a small country that is a price taker internationally. Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic production to:
A) increase from 2,400 to 7,400.
B) increase from 2,400 to 3,600.
C) decrease from 4,800 to 3,600.
D) decrease from 7,400 to 6,100.

Question

Refer to the graph shown for a small country that is a price taker internationally.  Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic production to:
A) increase from 2,400 to 7,400. 
B) increase from 2,400 to 3,600. 
C) decrease from 4,800 to 3,600. 
D) decrease from 7,400 to 6,100.

Quizplus · Accepted Answer

The Answer of Refer to the graph shown for a small country that is a price taker internationally.  Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic production to:
A) increase from 2,400 to 7,400. 
B) increase from 2,400 to 3,600. 
C) decrease from 4,800 to 3,600. 
D) decrease from 7,400 to 6,100.

Refer to the Graph Shown for a Small Country That