Exhibit 34-7

-Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). Americans purchase ______ units of X from U.S.producers and import _______ units of X from abroad.

Question

Exhibit 34-7
 
-Refer to Exhibit 34-7. Assume that the current price of X is $25 (which includes a $10 tariff on imports of product X). Americans purchase ______ units of X from U.S.producers and import _______ units of X from abroad.

Quizplus · Accepted Answer

If the current price of X is $25 including a $10 tariff on imports of product X, then the domestic price of X without the tariff would be $15. At this price, Americans will purchase 10 units from U.S. producers because they have to pay the $10 tariff on imported X, making imported X more expensive. However, they will still import units of X from abroad, and the quantity they import will be the difference between the domestic price of 15 and the world price of X. From the graph, we observe that the world price of X is $5, so the quantity of X imported from abroad will be 30 units (i.e., 15-5=10, and 10 x 3 = 30). Therefore, the answer is C (10 domestic, and 30 imported units).

Exhibit 34-7 -Refer to Exhibit 34-7. Assume That the Current Price of the Current