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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