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,domestic production and domestic consumption,respectively,are
A)1,200 and 800.
B)1,600 and 1,200.
C)1,600 and 800.
D)1,200 and 1,200

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,domestic production and domestic consumption,respectively,are
A)1,200 and 800. 
B)1,600 and 1,200. 
C)1,600 and 800. 
D)1,200 and 1,200

Quizplus · Accepted Answer

With free trade, the domestic price will equal the world price of $40 per unit. At that price, domestic production will be where the domestic supply curve intersects the price line, which is at a quantity of 1,600 units. Domestic consumption will be where the domestic demand curve intersects the price line, which is at a quantity of 800 units. Therefore, the correct answer is choice C) 1,600 and 800.

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