SCENARIO: DEMAND AND SUPPLY FOR IRON ORE
The table supplied represents a demand and supply
Schedule for a smallcountry producer of iron ore.It sells
Output in its home market and on the world market at the
World price of $70 per ton.
(Scenario: Demand and Supply for Iron Ore) How many
Tons will be sold domestically when exporters receive a
$10perton export subsidy?
A)10 tons
B)20 tons
C)30 tons
D)40 tons

Question

SCENARIO: DEMAND AND SUPPLY FOR IRON ORE
The table supplied represents a demand and supply
Schedule for a small­country producer of iron ore.It sells
Output in its home market and on the world market at the
World price of $70 per ton. 
(Scenario: Demand and Supply for Iron Ore) How many
Tons will be sold domestically when exporters receive a
$10­per­ton export subsidy?
A)10 tons 
B)20 tons 
C)30 tons 
D)40 tons

Quizplus · Accepted Answer

With a $10-per-ton export subsidy, exporters will be able to sell their iron ore for $80 per ton ($70 world price + $10 subsidy), making it more profitable to export than to sell domestically. As a result, domestic sales will decrease and exporters will increase their sales, leading to an increase in overall sales. The quantity demanded domestically will decrease from 50 to 20, and the quantity supplied for export will increase from 10 to 30. Therefore, the answer is C) 30 tons will be sold domestically.