Exhibit 17.1

-Refer to Exhibit 17.1 which shows the market equilibrium for corn in the United States. If the world price of corn is $6 and there are no trade restrictions, the United States will _____

Question

Exhibit 17.1
 
-Refer to Exhibit 17.1 which shows the market equilibrium for corn in the United States. If the world price of corn is $6 and there are no trade restrictions, the United States will _____

Quizplus · Accepted Answer

If the world price of corn is $6, it is lower than the domestic equilibrium price of $7 in the United States. As a result, US producers will decrease their production to 7,000 bushels of corn and US consumers will increase their consumption to 3,000 bushels of corn. The excess 4,000 bushels of corn will be exported to other countries where the world price is higher. Therefore, the United States will produce 7,000 bushels of corn, consume 3,000 bushels of corn, and export 4,000 bushels of corn.

Exhibit 17.1 -Refer to Exhibit 17.1 Which Shows the Market Equilibrium for the Market