The figure below depicts the steel market for Portugal, a small nation that is unable to affect the world price. Assume that Germany and France can supply steel to Portugal at a price of $200 and $300, respectively.

Figure 8.2. Portugal's Steel Market

-Consider Figure 8.2.If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports, it will purchase 5 tons of steel from France at a price of $500 per ton.

Question

The figure below depicts the steel market for Portugal, a small nation that is unable to affect the world price. Assume that Germany and France can supply steel to Portugal at a price of $200 and $300, respectively.

Figure 8.2. Portugal's Steel Market

-Consider Figure 8.2.If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports, it will purchase 5 tons of steel from France at a price of $500 per ton.

Quizplus · Accepted Answer

If Portugal levies a 100 percent nondiscriminatory tariff on its steel imports, the price of steel from France will increase to $1000 per ton, making it more expensive than the price of steel from Brazil at $800 per ton. Therefore, Portugal will likely purchase 5 tons of steel from Brazil instead of France.

The Figure Below Depicts the Steel Market for Portugal, a Small