Figure 17-2
-In Figure 17-2, in the absence of trade, the domestic price of shoes is P_n. Since many foreign countries have a comparative advantage in the production of shoes, when the United States begins to trade, the domestic price will fall to the world price. When this happens, what does the quantity Q_c through Q_p represent?

Question

Figure 17-2

-In Figure 17-2, in the absence of trade, the domestic price of shoes is P_n. Since many foreign countries have a comparative advantage in the production of shoes, when the United States begins to trade, the domestic price will fall to the world price. When this happens, what does the quantity Q_c through Q_p represent?

Quizplus · Accepted Answer

The quantity Q_c through Q_p represents the quantity of shoes that the United States imports because the domestic price falls to the world price, leading to an increase in imports to meet the excess demand at the lower price.