The figure below shows the demand (D)and supply (S)curves of cocoa in the U.S. Figure 20.4 From Figure 20.4, 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 20.4  From Figure 20.4, 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 the government imposes a tariff of $2 per pound on cocoa, the supply curve shifts leftward by $2 per pound. This means that the new supply curve would be S' and the equilibrium point would be at E'.

At the equilibrium point E', the price of cocoa would be $6 per pound and the quantity demanded would be 700 pounds. To find the total volume of U.S. cocoa imports, we need to subtract the quantity supplied by domestic producers from the quantity demanded in the market.

At a price of $6 per pound, the quantity supplied by domestic producers would be 200 pounds (point A on the S' curve). Therefore, the total volume of U.S. cocoa imports would be:

Total Imports = Quantity Demanded - Quantity Supplied by Domestic Producers
Total Imports = 700 - 200
Total Imports = 500 pounds

Thus, the correct answer is C) 100 pounds.

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