Figure 9-12
-Refer to Figure 9-12.With trade allowed,this country
A)exports 400 units of the good.
B)exports 800 units of the good.
C)imports 400 units of the good.
D)exports 1,600 units of the good.

Question

Figure 9-12 
-Refer to Figure 9-12.With trade allowed,this country
A)exports 400 units of the good. 
B)exports 800 units of the good. 
C)imports 400 units of the good. 
D)exports 1,600 units of the good.

Quizplus · Accepted Answer

With trade allowed, this country can sell the good at a higher price in the world market and therefore will increase production and exports. In this case, the world price is $10, which is higher than the domestic price of $6. This country will export the difference between the quantity supplied at the domestic price ($400) and the quantity demanded at the world price ($1200), which is 800 units (1200-400). Therefore, the best choice is B.

Figure 9-12 -Refer to Figure 9-12.With Trade Allowed,this Country