Figure 9.5.1
-Refer to Figure 9.5.1 above. With no government interference, the country pictured will:
A) import 500 tons of sugar.
B) import 300 tons of sugar.
C) import 200 tons of sugar.
D) import no sugar.
E) export sugar.

Question

Figure 9.5.1
-Refer to Figure 9.5.1 above. With no government interference, the country pictured will:
A) import 500 tons of sugar. 
B) import 300 tons of sugar. 
C) import 200 tons of sugar. 
D) import no sugar. 
E) export sugar.

Quizplus · Accepted Answer

The country will import sugar up to the point where the world price (PW) is equal to the domestic price (Pd). In this case, the world price is $400 per ton and the domestic price is $500 per ton. Therefore, the country will import sugar because it can buy it for a lower price in the world market. The quantity of sugar imported will be the difference between the domestic quantity demanded (600 tons) and the domestic quantity supplied (300 tons) at the world price, which is 300 tons (choice B).

Figure 9.5.1 -Refer to Figure 9.5.1 Above. with No Government Interference, the Interference