The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.
$$\begin{array} { | c | c | c | }
\hline \begin{array} { c }
\text { Quantity } \
\text { Supplied } \
\text { (Domestic) }
\end{array} & \text { Price } & \begin{array} { c }
\text { Quantity } \
\text { Demanded } \
\text { (Domestic) }
\end{array} \
\hline 12 & \$ 5 & 2 \
\hline 10 & 4 & 4 \
\hline 7 & 3 & 7 \
\hline 4 & 2 & 11 \
\hline 1 & 1 & 16 \
\hline
\end{array}$$ With a $1-per-unit tariff, price and total quantity sold will be

Question

The accompanying table gives domestic supply and demand schedules for a product. Suppose that the world price of the product is $1.
$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Supplied } \
\text { (Domestic) }
\end{array} & \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (Domestic) }
\end{array} \
\hline 12 & \$ 5 & 2 \
\hline 10 & 4 & 4 \
\hline 7 & 3 & 7 \
\hline 4 & 2 & 11 \
\hline 1 & 1 & 16 \
\hline
\end{array}$$ With a $1-per-unit tariff, price and total quantity sold will be

Quizplus · Accepted Answer

With a $1-per-unit tariff, the domestic supply curve shifts upward by $1 to account for the tariff cost. The new domestic supply schedule is:
$$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { Supplied } \
\text { (Domestic) }
\end{array} & \text { Price (including tariff)} & \begin{array} { c } 
\text { Quantity } \
\text { Demanded } \
\text { (Domestic) }
\end{array} \
\hline 12 & \$ 6 & 2 \
\hline 10 & 5 & 4 \
\hline 7 & 4 & 7 \
\hline 4 & 3 & 11 \
\hline 1 & 2 & 16 \
\hline
\end{array}$$ 
At a price of $2 (including tariff cost), the quantity demanded is 16 units, which exceeds the domestic quantity supplied. However, at a price of $3, the quantity supplied is 11 units, which exceeds the domestic quantity demanded. Therefore, the equilibrium price with the tariff is $2 and the total quantity sold is 11 units. The correct answer is D, $2 and 11 units.

The Accompanying Table Gives Domestic Supply and Demand Schedules for a Product