Figure: Supply and Demand at Home (Figure: Supply and Demand at Home) With a quota of 200 units,
What would be the price if the home market were competitive?

Question

Figure: Supply and Demand at Home  (Figure: Supply and Demand at Home) With a quota of 200 units,
What would be the price if the home market were competitive?

Quizplus · Accepted Answer

With a quota of 200 units, the quantity demanded in the home market would exceed the quantity supplied, leading to an increase in the price of the product. The equilibrium price before the quota was imposed was $20. Between the two prices following the quota, the price in a competitive market would be $23, where the demand curve intersects the supply curve at a quantity of 200. Therefore, the best choice is B.