Refer to the accompanying figure, which shows the annual domestic supply and annual domestic demand for jeans in a small country. Suppose this country initially does not trade with the rest of the world. If the world price of a pair of jeans is $40, and this country opens itself to trade, then the annual domestic production of jeans will:

Question

Refer to the accompanying figure, which shows the annual domestic supply and annual domestic demand for jeans in a small country.  Suppose this country initially does not trade with the rest of the world. If the world price of a pair of jeans is $40, and this country opens itself to trade, then the annual domestic production of jeans will:

Quizplus · Accepted Answer

At the initial equilibrium price of $120, domestic producers will produce 20,000 pairs of jeans per year. After trade, at the world price of $40, domestic producers will produce 4,000 pairs of jeans per year.

Refer to the Accompanying Figure, Which Shows the Annual Domestic