Please explain answer, thank you. Figure 1 Figure 1 shows the Hone market for PC

Question

Please explain answer, thank you.
Figure 1 Figure 1 shows the Hone market for PCs. Home country is a small country and PC market is a perfectly competitive market. Answer questions 11-13 according to Figure 1. 11) The government decides to import PCs due to lower world price, but restricts free trade by imposing produced domestically and how many PCs are consumed domestically after the quota is imposed? A) 300,000; 500,000 C) 400,000; 600,000 Supply 40 B) 500,000; 700,000 D) 600,000; 400,000 $20 - $10 Demand .. "-....: ne in anection 200 300 400 500 600 700 800 (thousands)

Explanation / Answer

Answer : 11) B. 500000; 700000

According to diagram the optimal production is 500 (thousands). Because optimal output level occur at that point where demand = supply. Thus the PC's domestic production is 500000. As country imports additional 200000 PCs, the total demand for PCs in the domestic country is (500000 + 200000) = 700000.This means that the domestic consumption is 700000 PCs.

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