Question

please explain in detail number 18 and make sure i can understand ur handwriting please

Figure 9-22 The following diagram shows the domestic demand and domestic supply in a market. In addition, assume that the world price in this market is $40 per unit. tMce 190 180 Domestic Supply 170 160 150 140 130 130 110 100 90 80 70 60- 50 40 30 Domestic Demand 20 30 Qity 1000 1300 1400 1500 1800 2000 2200 2400 200 400 600 800 17. Refer to Figure 9-22. With free trade, the country imports a. 300 units of the good. b. 600 units of the good. c. 900 units of the good. d. 1,200 units of the good. 18. Refer to Figure 9-22. Suppose the government imposes a tariff of $20 per unit. Relative to the free-trade outcome, the imposition of the tariff a. decreases imports of the good by 300 units and increases domestic production of the good by 300 units. b. decreases imports of the good by 300 units and increases domestic production of the good by 600 units c. decreases imports of the good by 600 units and increases domestic production of the good by 300 units. d. decreases imports of the good by 600 units and increases domestic production of the good by 600 units.

Answer 1

17) The world price is 40

When the trade is allowed, since the world price is less than domestic price, the country will become an importer of 1800-600 =1200 units

option(D)

18) With the tariff, the price increases to 40+20 = 60 where QD=1500 and QS=900 so Imports = 1500-900 = 600 units so imports decrease by 300 and domestic production increased by 300

option(C)