Refer to the table above for a certain product's market in Econland. If the world price of the product were $6 and a tariff of $1 per unit imported is imposed, then the quantity of output that would be supplied domestically would be:

Question

Quizplus · Accepted Answer

To find the quantity of output that would be supplied domestically, we need to look at the domestic supply curve. At a price of $6, the domestic producers are willing to supply 1,600 units. With the tariff of $1 per unit imported, the effective price of imports will be $7 per unit. At this price, the quantity of imports demanded will be 400 units (the difference between the quantity demanded and the quantity supplied at the world price of $6). Therefore, the quantity of output that would be supplied domestically would be 1,600 - 400 = 1,200 units. However, since the tariff revenue goes to the government, they may choose to reduce the supply to capture some of that revenue, hence the quantity supplied domestically would be less than 1,200 units. The closest option is C, which states that 1,600 units would be supplied domestically and 400 units would be imported.

Refer to the Table Above for a Certain Product's Market