Exhibit 17.b

-Refer to Exhibit 17.b, which shows the supply of a product in the United States. If the government establishes a sugar quota of Q to Q', the supply curve combining U.S. production and imports becomes _____ at the world price of _____ and remains horizontal until the quantity supplied reaches _____.

Question

Exhibit 17.b
 
-Refer to Exhibit 17.b, which shows the supply of a product in the United States. If the government establishes a sugar quota of Q to Q', the supply curve combining U.S. production and imports becomes _____ at the world price of _____ and remains horizontal until the quantity supplied reaches _____.

Quizplus · Accepted Answer

When the government establishes a sugar quota, only a limited quantity of sugar can be imported. Therefore, the supply of sugar combining U.S. production and imports would become horizontal at the level of the quota, which is Q', as indicated by the point C in the diagram. The supply curve would be horizontal at P' (the world price) until the quantity supplied reaches Q', the quota level.

Exhibit 17.b -Refer to Exhibit 17.b, Which Shows the Supply of a the Supply