1) On the figure showing the market for shoes, D(d) is domestic demand and S(d)
ID: 1221553 • Letter: 1
Question
1) On the figure showing the market for shoes, D(d) is domestic demand and S(d) is domestic supply. If not open to world trade, the price and quantity produced and demanded domestically are _______. P(c) is the world market price when the economy is open to trade, and if open to trade there will be _______.
A) P(a) and q; imports of da
B) P(b) and a; exports of cb
C) P(c) and a; a tariff of qb
2) If a tariff is imposed upon imported shoes that increases the price with trade prom P(c) and P(b), then domestic consumption will _______ and domestic production will ________.
A) increase from a to b; decrease from d to c
B) decrease from a to b; increase from d to c
C) increase from c to q; decrease from b to q
3) With the same tariff, imports will ________.
A) increase to da
B) decrease to ca
C) decrease to cb
4) With the same tariff, tariff revenue by paid domestic consumers is area _______.
A) yvut
B) xwvu
C) xwz
D) wvu
5) If an import quota of cb is imposed, then domestic price will be _______ and the area identified above _______.
A) P(a); will be paid by domestic consumers
B) P(b); will flow to foreign exporters with quota rights
C) P(c); will be paid by domestic producers
Explanation / Answer
1.
A) P(a) and q; imports of da
Explanation:
Without any open trade, equilibrium price and quantity will be Pa and q. Though, at price Pc, demand will be oa. Out of oa, od will be supplied by the domestic suppliers and da will be imported to satisfy the total demand.
2.
B) decrease from a to b; increase from d to c
Explanation:
Due to increase in price, consumption will come down from a to b. Also, domestic supply will increase from d to c.
3.
C) decrease to cb
Explanation:
Import will come down due to decrease in demand and simultaneous increase in domestic supply.
4.
B) xwvu
It is the area of tariff revenue.
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