Refer to the information provided in Figure 18.5 below to answer the questions that follow. Figure 18.5
-Refer to Figure 18.5. The domestic price of oil is $130 per barrel. If the world price of oil is $120 per barrel, this country will

Question

Refer to the information provided in Figure 18.5 below to answer the questions that follow.  Figure 18.5
-Refer to Figure 18.5. The domestic price of oil is $130 per barrel. If the world price of oil is $120 per barrel, this country will

Quizplus · Accepted Answer

When the world price of oil is lower than the domestic price of oil, it is cheaper to import oil from the rest of the world. The difference between the domestic price and the world price ($10) is the potential gain from trade, which means the country will import $10 cheaper oil from the world market. To determine the quantity of oil that will be imported, we need to find the quantity that corresponds to $10 on the vertical axis. Drawing a line from $10 on the vertical axis to the demand curve and then continuing the line until it intersects the horizontal axis shows that the country will import 14 million barrels of oil.

Refer to the Information Provided in Figure 18