Figure 9-2

-Figure 9-2 shows the domestic demand and supply for pencil sharpeners in China.Supposing China engages in trade with us,what will China do

Question

Figure 9-2
 
-Figure 9-2 shows the domestic demand and supply for pencil sharpeners in China.Supposing China engages in trade with us,what will China do

Quizplus · Accepted Answer

In Figure 9-2, the equilibrium price of pencil sharpeners in China is $2.50 and the equilibrium quantity is 200. If China engages in trade with the US, it will export pencil sharpeners because the world price of $4 is higher than the domestic price, which would create an incentive for Chinese producers to sell more and an opportunity for foreign buyers to purchase from China. To find the quantity of pencil sharpeners that China will export, we need to compare the domestic quantity supplied at the world price ($4) and the domestic quantity demanded at the world price ($1.50). From the graph, the quantity supplied at $4 is 450 and the quantity demanded is 200. Therefore, the quantity of pencil sharpeners that China will export is 450 - 200 = 250. Thus, the best choice is C, export 250 pencil sharpeners.

Figure 9-2 -Figure 9-2 Shows the Domestic Demand and Supply for Pencil