Figure 9-2

-Refer to Figure 9-2.At the world price and with free trade,
A) the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied.
B) the basket market is in equilibrium.
C) the domestic demand for baskets is perfectly inelastic.
D) both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade.

Question

Figure 9-2
 
-Refer to Figure 9-2.At the world price and with free trade,
A) the domestic quantity of baskets demanded is greater than the domestic quantity of baskets supplied. 
B) the basket market is in equilibrium. 
C) the domestic demand for baskets is perfectly inelastic. 
D) both domestic producers of baskets and domestic consumers of baskets are better off than they were without free trade.

Quizplus · Accepted Answer

At the world price, the quantity demanded and quantity supplied in the domestic market becomes equal, resulting in market equilibrium. Therefore, both domestic producers and consumers are better off with free trade. However, we cannot determine the elasticity of demand from the information given in the diagram.

Figure 9-2 -Refer to Figure 9-2.At the World Price and with Free