Figure 5.1 illustrates the steel market for Mexico, assumed to be a "small" country that is unable to affect the world price. Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1. Alternative Nontariff Trade Barriers Levied by a "Small" Country
-Consider Figure 5.1.With free trade, the quantity of steel imported by Mexico equals

Question

Figure 5.1 illustrates the steel market for Mexico, assumed to be a "small" country that is unable to affect the world price. Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1. Alternative Nontariff Trade Barriers Levied by a "Small" Country 
-Consider Figure 5.1.With free trade, the quantity of steel imported by Mexico equals

Quizplus · Accepted Answer

With free trade, Mexico will consume 6 tons of steel (point A), which is the intersection of the world price line ($200) and the domestic supply curve. At this price, domestic producers are willing to supply 4 tons and the remaining 2 tons will be imported from foreign producers.

Figure 51 Illustrates the Steel Market for Mexico, Assumed to Be