The following figure shows the domestic demand and supply curves for a good. With free trade, the price of the good in the domestic market is P 3 . The government introduces a 5% tariff in the market which raises the domestic price to P 2 .
Figure 7-1

-Refer to Figure 7-1. When trade is not restricted, the level of imports to the domestic market is _____.

Question

The following figure shows the domestic demand and supply curves for a good. With free trade, the price of the good in the domestic market is P 3 . The government introduces a 5% tariff in the market which raises the domestic price to P 2 .
Figure 7-1
 
-Refer to Figure 7-1. When trade is not restricted, the level of imports to the domestic market is _____.

Quizplus · Accepted Answer

When trade is not restricted, the level of imports is the difference between the quantity demanded and the quantity supplied domestically at the world price, which is represented by AE in the figure.

The Following Figure Shows the Domestic Demand and Supply Curves