Figure 9-2. The domestic country is China.

-Refer to Figure 9-2.With trade,China will

Question

Figure 9-2. The domestic country is China.
 
-Refer to Figure 9-2.With trade,China will

Quizplus · Accepted Answer

In a trade scenario, China would specialize in producing pencils, as they have a comparative advantage in that product. Thus, they would export pencils and import pencil sharpeners. From the graph, the world price of pencil sharpeners is 0.8 pencils, which is lower than China's domestic price of 1 pencil. Therefore, China would export 250 pencil sharpeners to take advantage of the higher world price, and import 200 pencils (the equivalent value of 250 sharpeners at the world price).

Figure 9-2. the Domestic Country Is China