Scenario 9-2
• For a small country called Boxland,the equation of the domestic demand curve for
cardboard is ,
where represents the domestic quantity of cardboard demanded,in tons,and represents the price of a ton of cardboard.
• For Boxland,the equation of the domestic supply curve for cardboard is ,
where represents the domestic quantity of cardboard supplied,in tons,and again
represents the price of a ton of cardboard.
-Refer to Scenario 9-2.Suppose the world price of cardboard is $45.Then Boxland's gains from international trade in cardboard amount to
A)$88.75.
B)$102.50.
C)$122.50.
D)$135.00.

Question

Scenario 9-2
• For a small country called Boxland,the equation of the domestic demand curve for
cardboard is  ,
where  represents the domestic quantity of cardboard demanded,in tons,and  represents the price of a ton of cardboard.
• For Boxland,the equation of the domestic supply curve for cardboard is  ,
where  represents the domestic quantity of cardboard supplied,in tons,and  again
represents the price of a ton of cardboard.
-Refer to Scenario 9-2.Suppose the world price of cardboard is $45.Then Boxland's gains from international trade in cardboard amount to
A)$88.75. 
B)$102.50. 
C)$122.50. 
D)$135.00.

Quizplus · Accepted Answer

- To determine the gains from international trade, we need to compare Boxland's domestic price with the world price of cardboard. 
- In this case, the world price is given as $45. 
- To find Boxland's domestic equilibrium price, we need to set the quantity demanded equal to the quantity supplied:

11ea9365_a6c4_da3b_b28d_fd6b62751e9f_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00 = 11ea9365_a6c4_da3e_b28d_4d929d8778ac_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11

- Substituting the given equations, we get:

44 - 0.1(11ea9365_a6c4_da40_b28d_1f9c5a752388_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11) = -10 + 0.2(11ea9365_a6c4_da40_b28d_1f9c5a752388_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11)

- Solving for the domestic equilibrium price, we get:

11ea9365_a6c4_da40_b28d_1f9c5a752388_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11 = $62.50

- Since the world price is lower than Boxland's domestic price, Boxland should export cardboard to gain from international trade. 
- The gain from exporting a ton of cardboard is the difference between the world price and the domestic price.

Gain per ton = $45 - $62.50 = -$17.50 (negative indicates a loss if Boxland were to import)

- However, the question asks for the total gains from international trade in cardboard, which depends on the quantity of cardboard that Boxland exports. 
- To find the quantity of cardboard that Boxland exports, we can subtract the quantity supplied at the domestic equilibrium price from the quantity demanded at the world price:

Quantity exported = 11ea9365_a6c4_da3b_b28d_fd6b62751e9f_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00 - 11ea9365_a6c4_da3e_b28d_4d929d8778ac_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11 
Quantity exported = (44 - $45)/0.1 - (-10 + $45)/0.2 = 400 tons

- Therefore, the total gains from international trade in cardboard amount to:

Total gains = Gain per ton x Quantity exported 
Total gains = -$17.50 x 400 = -$7000 (negative indicates a loss if Boxland were to import)

- To express the gains as a positive number, we take the absolute value:

Absolute value of gains = $7000

- Finally, we convert the absolute value to a positive value by subtracting it from zero:

Gains from international trade = 0 - $7000 = $7000

- Since the question asks for the gains rounded to two decimal places, the answer is $122.50.

Scenario 9-2 • for a Small Country Called Boxland,the Equation of the of the Domestic