Figure: Home's Exporting Industry I
The graph shows information about a home exporter.
(Figure: Home's Exporting Industry I) According to the
Graph, at the world price there is a ________ of ____ in
The home market, which is ____.
A)surplus; 60; imported
B)shortage; 60; imported
C)surplus; 60; exported
D)shortage; 100; exported

Question

Figure: Home's Exporting Industry I
The graph shows information about a home exporter. 
(Figure: Home's Exporting Industry I) According to the
Graph, at the world price there is a ________ of ____ in
The home market, which is ____.
A)surplus; 60; imported 
B)shortage; 60; imported 
C)surplus; 60; exported 
D)shortage; 100; exported

Quizplus · Accepted Answer

The graph shows a world price of $50. At this price, the domestic supply of 40 is lower than the domestic demand of 100, resulting in a shortage of 60. To meet this shortage, the home market will need to import goods from the foreign market, which is the opposite of what option D suggests. Option A is incorrect as there is a shortage and not a surplus, and option B is incorrect as it suggests that there is a shortage of 60 in the foreign market, which the graph does not show. Therefore, option C is the best answer which correctly identifies a surplus of 60 in the foreign market that is exported to the domestic market to meet the shortage.