Use the Following Figure to Answer the Questions : Figure

Use the following figure to answer the questions : Figure 10-5 shows the domestic U.S.market for bananas and the global market for bananas.The domestic supply curve is given by SUPPLY_US.With free trade,the equilibrium output in the U.S.market is Q.The import quota imposed by the government is equal to 0A.
-Refer to Figure 10-5.Given that trade in bananas is free from any restrictions,which of the following would be true if P₅ was lesser than P₃?

A) The domestic demand for bananas would be fully satisfied through imports.
B) The U.S.would not import bananas;domestic demand would be satisfied by domestic production.
C) Domestic producers would be worse off and foreign producers would be better off.
D) Domestic consumers would lose surplus as they would have to pay a higher domestic price.

Correct Answer:

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