Refer to the accompanying figure, which shows the annual domestic supply and annual domestic demand for jeans in a small country. Suppose this country is open to trade with the rest of the world, and the world price of a pair of jeans is $40. If the government imposes a quota on imported jeans of 12,000 pairs per year, then the new equilibrium price of jeans in this country will be:

Question

Refer to the accompanying figure, which shows the annual domestic supply and annual domestic demand for jeans in a small country.  Suppose this country is open to trade with the rest of the world, and the world price of a pair of jeans is $40. If the government imposes a quota on imported jeans of 12,000 pairs per year, then the new equilibrium price of jeans in this country will be:

Quizplus · Accepted Answer

The quota can be thought of as a rightward shift in the supply curve by 12,000 pairs of jeans. The new equilibrium price is determined by the intersection of the demand curve and the new supply curve, which, in this case, occurs at a price of $80.

Refer to the Accompanying Figure, Which Shows the Annual Domestic