The figure below shows the demand (D)and supply (S)curves of cocoa in the U.S. Figure 21.4 From Figure 21.4, determine the total volume of U.S.cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

Question

The figure below shows the demand (D)and supply (S)curves of cocoa in the U.S. Figure 21.4  From Figure 21.4, determine the total volume of U.S.cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

Quizplus · Accepted Answer

When a tariff is imposed on cocoa, the supply curve shifts upwards by the amount of the tariff, in this case $2 per pound. This means that at any given price, the quantity supplied will be $2 higher than before. As a result, the new equilibrium price (P') will be higher than the old equilibrium price (P) and the quantity demanded and supplied will decrease.

To find the new equilibrium quantity, we need to look at the point where the new supply curve intersects the old demand curve. This occurs at point E' in the figure below.

Figure: 
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We can see that at equilibrium, the quantity of cocoa imported is around 100 pounds. Therefore, the answer is C) 100 pounds.

The Figure Below Shows the Demand (D)and Supply (S)curves of Cocoa