The following figure shows the demand curve, D, and supply curve, S, of ballpoint pens in Lithasia. The world price of pens is $2.

-Refer to the figure above.What is the domestic production of pens in Lithasia after the economy opens up to free trade?

Question

The following figure shows the demand curve, D, and supply curve, S, of ballpoint pens in Lithasia. The world price of pens is $2.
 
-Refer to the figure above.What is the domestic production of pens in Lithasia after the economy opens up to free trade?

Quizplus · Accepted Answer

After the economy opens up to free trade, the domestic production of pens in Lithasia will be 6 units. This is because the world price of pens is lower than the domestic price in Lithasia, so it will be more profitable for Lithasia to import pens from other countries rather than produce them domestically.

The Following Figure Shows the Demand Curve, D, and Supply