Suppose That the Free-Trade Price of a Ton of Steel

Multiple Choice

Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60-per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. Suppose that Finland decides to use an import quota to achieve the same effects on domestic steel production as the tariff. How large a quota must it use?

A) €60
B) 100,000 tons
C) 200,000 tons
D) 300,000 tons