Refer to the Following Graph

question 65

Multiple Choice

Refer to the following graph. Demand and supply are initially D and S1, respectively. Which of the following best describes the effect of a $0.50 per pound tariff on Danish hams imported into the United States?

• A) Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price paid by consumers declines to $1.75 a pound
• B) Neither supply nor demand shift, but price paid by consumers declines to $1.50 a pound while quantity sold remains at 80 thousand pounds
• C) Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.50 a pound
• D) Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price paid by consumers rises to $2.25 a pound

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Definitions:

ATC Curve

Average Total Cost Curve, a graphic representation that shows the cost per unit of output produced.

Barriers to Entry

Factors that make it difficult for new firms to enter a market, such as high startup costs, stringent regulations, or strong competition from existing firms.

Administered Prices

Prices that are set by the company rather than determined by market demand and supply conditions; often found in less competitive markets.

Cartel

An association of independent businesses or countries agreeing to coordinate their production and pricing to monopolize a market or maximize profits.