The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.
Figure 20.4

-Refer to Figure 20.4. Assume that Ghana is the only cocoa exporter supplying cocoa in the world market at $6 per pound. If the U.S. enters into a free trade agreement (FTA) with Ghana, what would be its total cocoa imports?

Question

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.
Figure 20.4
 
-Refer to Figure 20.4. Assume that Ghana is the only cocoa exporter supplying cocoa in the world market at $6 per pound. If the U.S. enters into a free trade agreement (FTA) with Ghana, what would be its total cocoa imports?

Quizplus · Accepted Answer

With Ghana being the only cocoa exporter supplying cocoa in the world market at $6 per pound and assuming the FTA eliminates all tariffs and trade barriers, the new world price will be $6 per pound. At this price, the quantity demanded in the U.S. market will be 400 pounds (point A on the graph), while the quantity supplied by Ghana will be 200 pounds (point B on the graph). Therefore, the total cocoa imports of the U.S. will be 200 pounds (400 - 200).

The Figure Below Shows the Demand (D) and Supply (S)