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

question 38

Multiple Choice

The graph shown demonstrates the domestic demand and supply for a good, as well as a quota and the world price for that good. If this economy's government decides to impose a quota instead of a tariff:

• A)areas F and H will become deadweight loss instead of transferred surplus.
• B)area E will represent tax revenues instead of transferred surplus.
• C)areas F + G + H will become deadweight loss instead of tax revenues.
• D)area G will represent quota rents instead of tax revenues.

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Definitions:

Indifference Curve

A graphical representation showing combinations of goods among which a consumer is indifferent, indicating the same level of utility or satisfaction.

Budget Line

The graphical depiction of the trade-off between two goods, demonstrating the combinations that a consumer can afford based on their income and the goods' prices.

Marginal Utility

The change in total satisfaction received from consuming one additional unit of a good or service.

Potato Chips

A thin slice of potato that has been deep fried, baked, or otherwise cooked until crunchy, often served as a snack.