Suppose the domestic supply (Q^S_U.S.) and demand (Q^D_U.S)for bicycles in the United States are given by the following set of equations: $$\begin{array} { l } Q ^ { \mathrm { S } } \mathrm { U.S } . = 2 \mathrm { P } \ \mathrm { Q } _ { ^\mathrm { D } U . S } = 200 - 2 \mathrm { P } . \end{array}$$ Demand (Q^D) and supply (Q^S) in the Rest of the World are given by the equations: $$\begin{array} { l } Q ^ { S } = P \ Q ^ { D } = 160 - P . \end{array}$$ Quantities are measured in thousands and price in U.S. dollars. After the opening of free trade with the Rest of the World, if the world price of the bicycles settles at $60, the U.S. will: A)export 40,000 bicycles. B)export 60,000 bicycles. C)import 60,000 bicycles. D)import 40,000 bicycles.

Question

Quizplus · Accepted Answer

At a world price of $60, the U.S. will export 40,000 bicycles. This is because the U.S. supply at that price is 120,000 bicycles, while the U.S. demand is only 80,000 bicycles.

Suppose the Domestic Supply (QSU Demand (QD) and Supply (QS) in the Rest of the the United

Suppose the Domestic Supply (Q^S_{U Demand (Q^D) and Supply (Q^S) in the Rest of the the United}