Exhibit 34-7

-Refer to Exhibit 34-7.The world price of X is $15.If imports of X are legally limited to 30 units,the price of X in the United States would be

Question

Exhibit 34-7
 
-Refer to Exhibit 34-7.The world price of X is $15.If imports of X are legally limited to 30 units,the price of X in the United States would be

Quizplus · Accepted Answer

According to the exhibit, the domestic supply of X is 80 units at a price of $25 and the domestic demand is 140 units at a price of $15. If imports are legally limited to 30 units, the domestic supply would be reduced to 50 units at a price of $30 because there would be less competition from imports. At this price, the quantity demanded would be 110 units, resulting in a shortage of 40 units (110-50-30). This shortage would drive up the price of X in the United States to $25, which is the highest price at which domestic suppliers are willing and able to supply 80 units. Therefore, the price of X in the United States would be $25, not $20, $30, or $35, making option B the correct answer.

Exhibit 34-7 -Refer to Exhibit 34-7.The World Price of X Is $15.If