The figure given below represents the domestic market for wheat in a small country. Imports of wheat are prohibited. At a world price of $160 per bushel, the country produced _____ bushels of wheat and exported _____ bushels of wheat.

Question

The figure given below represents the domestic market for wheat in a small country. Imports of wheat are prohibited.  At a world price of $160 per bushel, the country produced _____ bushels of wheat and exported _____ bushels of wheat.

Quizplus · Accepted Answer

At a world price of $160 per bushel, the domestic supply curve intersects the domestic demand curve at a quantity of 120 bushels. Since imports are prohibited, this is the quantity produced in the country. At this quantity, the domestic price is $240 per bushel, which is higher than the world price. Therefore, the country will not export any wheat.

The Figure Given Below Represents the Domestic Market for Wheat