Refer to the graph shown for a small country that is a price taker internationally.
Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic production to:
A. increase from 2,400 to 7,400.
B. decrease from 7,400 to 6,100.
C. increase from 2,400 to 3,600.
D. decrease from 4,800 to 3,600.
Answer: C
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