In the graph below, which of the following statements is TRUE? Price Supply Dome

Question

In the graph below, which of the following statements is TRUE? Price Supply Domestic $32,000 Supply after Tariff 30,000 Supply before Tariff lume Demand ? 10 Quantity of Cars (Millions of Cars) The tariff reduces imports from 5 million cars to 2 million cars O The tariff increases domestic production of cars from 5 million O The tariff reduces consumer purchases of cars from 10 millior O The tariff leaves the domestic price unchanged at $30,000 per O The tariff reduces the domestic supply of cars from 6 million to cars to 8 million cars. cars to 6 million cars. car. 5 million cars.

Explanation / Answer

Before the tariff was imposed the imports were 5 million. Local production was 5 million and demand was 10 million. the remaining 5 million was coming from imports. After the tariff is imposed the local production increased from 5 to 6 million and imports reduced to 2. as the overall demand is just 8 million.

The answer is "A"

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