In the following offer curve diagram, OC_A is the free-trade offer curve of country A, OC_B is the free-trade offer curve of country B, and OC'_A (which starts at the origin O, goes to point M and then comes back horizontally to point Y') is the offer curve of country A when it has a restrictive trade policy instrument in place (while country B continues with free trade) . In this situation, the restrictive instrument that country A has employed is __________, and the resulting equilibrium position E' is __________ equilibrium position.

Question

In the following offer curve diagram, OC<sub>A</sub> is the free-trade offer curve of country A, OC<sub>B</sub> is the free-trade offer curve of country B, and OC'<sub>A</sub> (which starts at the origin O, goes to point M and then comes back horizontally to point Y') is the offer curve of country A when it has a restrictive trade policy instrument in place (while country B continues with free trade) . In this situation, the restrictive instrument that country A has employed is __________, and the resulting equilibrium position E' is __________ equilibrium position. A) a voluntary export restraint (VER) on its exports to country B; an unstable B) a voluntary export restraint (VER) on its exports to country B; a stable C) an import quota; an unstable D) an import quota; a stable

Quizplus · Accepted Answer

The offer curve of country A with a restrictive trade policy instrument in place (OC'_A) intersects with the free-trade offer curve of country B (OC_B) at point E', which is a stable equilibrium position. This indicates that country A has implemented an import quota, as it is limiting the quantity of imports into the country. Therefore, the correct answer is D.

In the Following Offer Curve Diagram, OCA Is the Free-Trade

In the Following Offer Curve Diagram, OC_A Is the Free-Trade