Si S2 25 n 20 2 15-- 400 500 600 800 Quantity of Oranges Refer to the figure abo

Question

Si S2 25 n 20 2 15-- 400 500 600 800 Quantity of Oranges Refer to the figure above. Suppose S1 is the domestic supply curve and there is a 200-ton import quota. With a world price of $15, the net effect of this quota is to a. generate $2000 in import tax revenue b. decrease prices by $10 compared to the no-trade price. c. increase prices by $5 compared to the no-trade price. d. cause domestic production to equal 600 units. e. cause domestic producers to increase production by 200 tons compared to 22. their free trade quantity produced.

Explanation / Answer

22. D. Domestic production will increase ( 800 -200) units= 600 units. Import quotas will not bring revenue to the government but will help domestic producers.

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