Figure 9-21
The following diagram shows the domestic demand and domestic supply for a market.In addition,assume that the world price in this market is $40 per unit.
-Refer to Figure 9-21.With free trade,the domestic price and domestic quantity demanded are
A)$30 and 1,200.
B)$40 and 800.
C)$30 and 800.
D)$40 and 1,600.

Question

Figure 9-21
The following diagram shows the domestic demand and domestic supply for a market.In addition,assume that the world price in this market is $40 per unit. 
-Refer to Figure 9-21.With free trade,the domestic price and domestic quantity demanded are
A)$30 and 1,200. 
B)$40 and 800. 
C)$30 and 800. 
D)$40 and 1,600.

Quizplus · Accepted Answer

With free trade, the domestic price will equal the world price of $40 per unit. At this price, the domestic quantity demanded is 800 units, which is the point where the domestic demand curve intersects the price line of $40. Therefore, the correct answer is choice B, which represents a domestic price of $40 and a domestic quantity demanded of 800 units.

Figure 9-21 The Following Diagram Shows the Domestic Demand and Domestic Supply