The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by Q^d = 100 - P and domestic supply is given by Q^s = 4P. The world price for calculators is $10. Now, a tariff of $10 is imposed on all imports. How many units of calculators will be imported now? A) 0 B) 10 C) 30 D) 50

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Quizplus · Accepted Answer

Since the tariff is equal to the world price, the domestic price of calculators will increase to $20 after the tariff is imposed. At this price, domestic supply (4P) is greater than domestic demand (100-P), meaning there is no need for imports. Therefore, the quantity of imported calculators will be 0.

The Domestic Market for Calculators Is Perfectly Competitive and Is