The figure given below shows the market for MP3 players in a small country. D_d and S_d are the domestic demand and domestic supply curves of the MP3 players before the imposition of the quota. (S_d + Q_Q) is the total available domestic supply curve after the quota has been imposed. How many MP3 players can be imported from abroad after the quota is imposed?

Question

Quizplus · Accepted Answer

Before the imposition of the quota, the domestic supply (S_d) is 10 million and domestic demand (D_d) is 12 million, resulting in a domestic shortage of 2 million MP3 players. After the quota, the available domestic supply (S_d + Q_Q) is limited to 8 million MP3 players. Therefore, to meet the domestic demand of 12 million, 4 million MP3 players need to be imported. Since the quota limits the total imports to 5 million MP3 players, the maximum number of MP3 players that can be imported from abroad after the quota is imposed is B) 5 million.

The Figure Given Below Shows the Market for MP3 Players