The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
FIGURE 33- 5
-Refer to Figure 33- 5.If Paperland engages in international trade and the world price is PC,the amount of newsprint produced by Paperland will be

Question

The diagram below shows the domestic demand and supply curves in the market for newsprint in Paperland.
  FIGURE 33- 5
-Refer to Figure 33- 5.If Paperland engages in international trade and the world price is PC,the amount of newsprint produced by Paperland will be

Quizplus · Accepted Answer

The world price, PC, is lower than the domestic equilibrium price, P1, so Paperland will begin importing newsprint. At PC, domestic suppliers will only supply Q2, while domestic demand will be at Q3. Therefore, Paperland will import the difference, which is Q3 - Q2. This amount of newsprint is indicated by the horizontal distance between Q2 and Q3 on the diagram.

The Diagram Below Shows the Domestic Demand and Supply Curves