Refer to the Graph Shown for a Small Country That

question 13

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.To have the same effect on imports as a $2 per-unit tariff, the government would need to set an import quota of:

• A)1,200 units.
• B)1,300 units.
• C)2,500 units.
• D)5,000 units.

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Definitions:

Lump-Sum Tax

A tax that is the same amount for every person.

Deadweight Loss

A cost to society created by market inefficiency, which occurs when supply and demand are out of equilibrium.

Ability-To-Pay Principle

A principle in taxation that holds that taxes should be levied according to an individual's or entity's capacity to pay.

Financial Burden

A financial burden is a substantial monetary load that may come in the form of debt, high costs, or other financial obligations that affect an individual's or entity's budget or financial well-being.