Assume that the United States is the only supplier of grain to China and that it levies a partial export embargo against China.The embargo leads to increased U.S.welfare if the resulting improvement in the U.S.terms of trade with China more than offset the costs of the lower export volume to China.

Question

Quizplus · Accepted Answer

While the situation described in the first sentence is unrelated to the figure provided, the statement about a partial export embargo leading to increased U.S. welfare is generally true. By restricting the supply of grain to China, the U.S. can drive up its price and negotiate a more favorable exchange rate with China, potentially resulting in a net gain for the U.S. even though it is selling less grain overall. However, the specific details of such an embargo and its effects on the U.S. and Chinese economies would depend on a variety of factors beyond the scope of this question.

Assume That the United States Is the Only Supplier of Grain