Refer to the graph above, where S_d and D_d are the domestic supply and demand curves for a product. The world price of the product is $6. If an import quota of 40 units were imposed on the product, then the equilibrium price would be:

Question

Quizplus · Accepted Answer

With an import quota of 40 units, the domestic supply would now equal 120 units (80 units of domestic production and 40 units from the quota). This would cause the equilibrium price to increase to the point where domestic supply and demand intersect, which is at a price of $8 and a quantity of 70 units consumed domestically (30 units produced domestically plus 40 units from the quota).

Refer to the Graph Above, Where Sd and Dd Are

Refer to the Graph Above, Where S_d and D_d Are