Refer to the table above for a certain product's market in Econland. If the world price of the product were $6 and an import quota of 400 units were imposed on the product, then the equilibrium price in Econland would be:

Question

Quizplus · Accepted Answer

Before the imposition of the import quota, the equilibrium price in Econland was $8, and the quantity demanded and supplied was 2,200 units. With the world price of $6, there would be an excess supply of 400 units (2,200 - 1,800). Therefore, to maintain the domestic price at $8, the government would need to restrict the quantity demanded to 1,600 units (2,000 - 400). This results in a shortage of 200 units in the domestic market, which causes the price to rise to $7 (the highest price at which quantity demanded equals 1,800 units). Thus, the equilibrium price in Econland would be $7 and the total quantity available in Econland would be 2,000 units.

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