The figures given below illustrate a situation of a trade embargo. In Figure (a) D_d and S_d are the domestic demand and supply curves of the embargoing countries. The import price is P₀ and the target country imports the amount Q₀before the embargo is imposed. As a result of this embargo, the exporting countries not participating in the embargo gain area _____. A)a B)b C)c D)(b + c)

Question

Quizplus · Accepted Answer

After the trade embargo, the target country will have to rely on domestic production or find alternative import sources, leading to a decrease in imports from the embargoing countries. This decrease in demand will result in a surplus of goods in the embargoing countries, which they will try to sell to other countries at lower prices, thus increasing their exports to non-embargoing countries. This increase in exports to non-embargoing countries is represented by area B in the figure. Therefore, the correct answer is B.

The Figures Given Below Illustrate a Situation of a Trade