s it possible that an outright ban on foreign imports will have no effect on the
ID: 1123363 • Letter: S
Question
s it possible that an outright ban on foreign imports will have no effect on the equilibrium price? (Hint Suppose that imports occur only at relatively high prices.) An import ban A. would have no effect if domestic supply were zero at the equilibrium price. B. would have no effect if the world price were less than the equilibrium price. O C. would have an effect if the world price were equal to the domestic price. D. would have an effect if imports were positive at the equilibrium price. O E. would have an effect if domestic demand were positive at the equilibrium price.Explanation / Answer
Answer : E. would have an effect if domestic demand were positive at the equilibrium price.
Because of positive demand import remain same as before outright ban on foreign import. As a result after imposing a outright ban on import the suppliers cost increase because they have to pay government a fixed amount on per import. Therefore, price automatically increase and demand curve shifts rightward because of positive demand. Ultimately equilibrium condition will be changed.
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