(Figure: A Country's Before and After Trade Equilibria) How many computers will this nation export?
A) 0
B) 125
C) 350
D) 500

Question

(Figure: A Country's Before and After Trade Equilibria) How many computers will this nation export? 
A) 0 
B) 125 
C) 350 
D) 500

Quizplus · Accepted Answer

At the initial equilibrium (point A), this nation is importing 500 computers as the domestic price (Pd) is higher than the world price (Pw). After the opening of trade, the nation reaches a new equilibrium (point B) where the domestic price (Pd*) is equal to the world price (Pw) and the quantity demanded (Qd*) is higher than the quantity supplied (Qs*). Therefore, the nation will export the difference between Qd* and Qs*, which is 125 computers (Qd* - Qs* = 500 - 375 = 125).

(Figure: a Country's Before and After Trade Equilibria) How Many