This Graph Demonstrates the Domestic Demand and Supply for a Good,as

question 134

Multiple Choice

This graph demonstrates the domestic demand and supply for a good,as well as a tariff and the world price for that good.
According to the graph shown,if the economy was operating under free trade,who would be in favor of a tariff?

• A)Domestic producers
• B)Domestic consumers
• C)Foreign producers
• D)All of these groups would be in favor of such a restriction on trade.

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Definitions:

Substitution Effect

The change in the consumption pattern of goods due to a change in relative prices, holding the level of utility constant.

Output Effect

The change in total output resulting from a change in input quantities or the introduction of new processes or technologies in the production.

Price of Capital

The cost of using capital goods, such as equipment or buildings, which is often reflected in interest rates or rental charges.

Complementary to Labor

Refers to technology or tools that enhance the productivity of workers, increasing output.