Refer to the Graph Shown for a Small Country That

question 22

Multiple Choice

Refer to the graph shown for a small country that is a price taker internationally. Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic production to:

• A) increase from 2,400 to 7,400.
• B) increase from 2,400 to 3,600.
• C) decrease from 4,800 to 3,600.
• D) decrease from 7,400 to 6,100.

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Definitions:

Normative

Relating to an ideal standard or model, and pertaining to rules that govern behavior within a group or society.

Empirical

Based on observation or experience rather than theory or pure logic, relating to data which can be measured or observed directly.

Diagnostic

Pertaining to or aiding in the detection and identification of a disease, condition, or distinctive characteristics.

Binge Drinking

The consumption of an excessive amount of alcohol in a short period of time, typically defined as five or more drinks for males, and four or more drinks for females, in about two hours.