Exhibit 19-8

-Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the welfare loss resulting from higher domestic production costs?

Question

Exhibit 19-8
 
-Refer to the graph in the exhibit.Suppose the country is initially trading without restrictions at a world price of $2.00, and an import quota of 50 units per month is enacted.What area represents the welfare loss resulting from higher domestic production costs?

Quizplus · Accepted Answer

Area b represents the welfare loss due to higher domestic production costs, as it reflects the inefficiency of producing goods domestically at a higher cost than the world price.

Exhibit 19-8 -Refer to the Graph in the Exhibit.Suppose the Country Is