Figure 51 Illustrates the Steel Market for Mexico, Assumed to Be

question 26

Multiple Choice

Figure 5.1 illustrates the steel market for Mexico, assumed to be a "small" country that is unable to affect the world price. Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1. Alternative Nontariff Trade Barriers Levied by a "Small" Country
-Consider Figure 5.1.Suppose the rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an export quota equal to 2 tons.Assuming Mexican importers behave as monopoly buyers while foreign exporters behave as competitive sellers, the overall welfare loss of the quota to Mexico is

• A) $200.
• B) $400.
• C) $600.
• D) $800.