Refer to the Following Graph

question 56

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:

Inelastic Segment

The inelastic segment defines a range within the demand curve where the quantity demanded changes very little in response to changes in price. Demand is relatively insensitive to price adjustments.

Total Revenue

The overall sum of money received by a company or individual from the sale of goods or services, before any expenses are subtracted.

Marginal Revenue

The additional income generated from selling one more unit of a good or service, crucial for decision-making in production and pricing strategies.

Nondiscriminating Monopolist

A monopolist that charges all consumers the same price for its product, regardless of the quantity purchased or consumer identity.