Refer to the Graph Shown for a Small Country That

question 70

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, an import quota of 2,500 would cause domestic consumption to:

• A) increase from 6,100 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:

Income Subsidy

An income subsidy is a government-provided financial assistance program intended to boost an individual's income to a level sufficient for meeting basic living standards.

Negative Income Tax

A program where the government provides additional income to those who earn under a specific threshold, rather than collecting taxes from them.

Tax Liability

Tax liability is the total amount of tax that an individual or organization is legally obligated to pay to a taxing authority based on earnings, property ownership, or other taxable conditions.

Earned Income Tax Credit

A tax credit in the United States designed to benefit individuals and families with low to moderate incomes, effectively reducing the amount of tax owed and possibly resulting in a refund.