The table below shows the demand and supply for metal in two countries: Gabon an

Question

The table below shows the demand and supply for metal in two countries: Gabon and Malaysia. Use the information In the table provided to answer the questions below. Price ($) per pound (lb) of metal Malaysia imposes an import quota on metal from Gabon, limiting imports to 40 pounds. How is this quota likely to affect the price of metal in Malaysia? The price will be higher than free trade levels, but the same as when no trade existed. The price will be the same as free trade levels, but lower than when no trade existed. The price will be higher than free trade levels, but lower than when no trade existed. The price will be lower than free trade levels, but higher than when no trade existed. Using free trade as the starting point, how will this quota affect consumers and producers in Gabon? Only producers will benefit, consumers will not benefit. Neither consumers, nor producerswill benefit. Consumers and producers will both benefit. Only consumers will benefit, producers will not benefit

Explanation / Answer

Solution :

Option C

Explanation : Due to import quota the quantity supplied in Malaysia decreases and the demand for the metal increases . To counter this demand the price also rises in Malaysia but the prices will be lower than when no trade existed .

Option D

Due to import limit set by Malaysia , the supply of metal increases in Gabon and the demand will decrease . The benefit will be to consumers because the price of the metal will go down and consumers will have to pay less price .

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