The Graph Shown Demonstrates the Domestic Demand and Supply for a Good

question 56

Multiple Choice

The graph shown demonstrates the domestic demand and supply for a good, as well as a tariff and the world price for that good. If this economy decides to open to free trade and imposes a tariff, the domestic quantity demanded will:

• A)decrease from 1,500 units to 1,150 units.
• B)increase from 1,150 units to 1,500 units.
• C)increase from 815 units to 1,150 units.
• D)decrease from 1,150 units to 815 units.

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Definitions:

Marginal Cost

The expense involved in making an extra unit of a good or service.

Additional Unit

Refers to one more unit of something, often used in the context of production, sales, or inventory.

Variable Cost

Expenses that change in proportion to the activity of a business such as production levels or sales volume.

Wages

Compensation received by employees for their labor, typically expressed as an hourly, daily, or piecework rate, or as an annual salary.