Figure 9-12

-Refer to Figure 9-12.With trade allowed,this country
A) exports 200 units of the good.
B) exports 400 units of the good.
C) imports 200 units of the good.
D) exports 800 units of the good.

Question

Figure 9-12
 
-Refer to Figure 9-12.With trade allowed,this country
A) exports 200 units of the good. 
B) exports 400 units of the good. 
C) imports 200 units of the good. 
D) exports 800 units of the good.

Quizplus · Accepted Answer

When trade is allowed, the world price is determined by the intersection of world supply and demand (shown by the dashed line). This world price is lower than the domestic price, which leads to domestic producers only being willing to supply 200 units (point A) and domestic consumers willing to demand 800 units (point D). The difference between domestic supply and demand (600 units) is filled by imports. Therefore, the country would import 600 units of the good and export the difference between domestic supply and the amount of imports, which is 400 units.

Figure 9-12 -Refer to Figure 9-12.With Trade Allowed,this Country