Figure 5.4. Venezuelan Calculator Market
-Consider Figure 5.4.Assume the Venezuelan government grants its manufacturers a production subsidy of $4 per calculator.After the subsidy is granted, Venezuelan imports total

Question

Figure 5.4. Venezuelan Calculator Market 
-Consider Figure 5.4.Assume the Venezuelan government grants its manufacturers a production subsidy of $4 per calculator.After the subsidy is granted, Venezuelan imports total

Quizplus · Accepted Answer

Before the subsidy, the price of a domestic calculator is $12 and the price of a foreign calculator is $10. Therefore, consumers would prefer to buy foreign calculators, and the quantity demanded of domestic calculators is 10. With the subsidy, the domestic price falls to $8 per calculator ($12 - $4), making it more competitive with the foreign calculator. As a result, the quantity demanded of domestic calculators increases to 20, while the quantity supplied increases to 16. The difference between quantity demanded (20) and quantity supplied (16) is the amount that is imported, which is 16 calculators. Thus, the answer is C) 16 calculators.