Figure 34-9

In Figure 34-9, hostilities break out between Pastaland and Pestoland after Pestoland violates the Treaty of Basil. Consequently, trade stops and the price of pasta

Question

Figure 34-9 ​

In Figure 34-9, hostilities break out between Pastaland and Pestoland after Pestoland violates the Treaty of Basil. Consequently, trade stops and the price of pasta

Quizplus · Accepted Answer

When trade stops between the two countries, the supply of pasta in Pastaland decreases since they are not able to export as much to Pestoland. This causes the price of pasta in Pastaland to rise to OJ. On the other hand, the supply of pasta in Pestoland increases since they are not importing as much from Pastaland. This causes the price of pasta in Pestoland to fall to OC. Therefore, the correct option is D.

Figure 34-9 ​ In Figure 34-9, Hostilities Break Out Between Pastaland and Pestoland

Figure 34-9 In Figure 34-9, Hostilities Break Out Between Pastaland and Pestoland