Under what circumstances will the residual supply curve for a country be upward sloping?
A) when it does not import any of the good from the rest of the world
B) when it imports a small portion of the rest of the world's supply of the good
C) when it imports a large portion of the rest of the world's supply of the good
D) Either A or B

Question

Quizplus · Accepted Answer

The residual supply curve for a country will be upward sloping when it imports a large portion of the rest of the world's supply of the good. This is because as the country imports more of the good, it will become increasingly reliant on the world market and will have less domestic production available to meet its needs. As a result, the price at which domestic producers are willing and able to supply the good will increase, leading to an upward sloping residual supply curve. Option A is incorrect because if the country does not import any of the good, then there will be no residual supply curve to speak of. Option B is incorrect because if the country only imports a small portion of the rest of the world's supply of the good, then it will still have significant domestic production available to meet its needs and the residual supply curve is likely to be fairly flat or only slightly upward sloping.

Under What Circumstances Will the Residual Supply Curve for a Country