QUESTION 8 In this figure, the country is importing a product at the world price

Question

QUESTION 8 In this figure, the country is importing a product at the world price of $3 per unit. In order to protect its infant industry, this country imposes a tariff of $2 per unit bringing the domestic price of the product to $5 per unit. In retaliation, the exporting countries lower the price of the product imported into this country, which results in a lower world price at $2 per unit. Meanwhile, the importing country keeps the domestic price at $5 in order to continue to protect the domestic industry. Please answer the following questions based on this information. Price 13 12 Demand 10 upply 4 R V Quantity Refer to the above figure. At the new world price the amount imported into this country is a. IH O b.JF d. None of the abvoe

Explanation / Answer

Ans: IH

Explanation:

At the domestic price of $5, Demand = GH and Supply = GI. Thus, import amount = GH - GI = IH.

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