country will be neither an exporter nor an importer of the good. Additional info
ID: 1114551 • Letter: C
Question
country will be neither an exporter nor an importer of the good. Additional information is needed about demand to determine whether the be an exporter of the good, an importer of the good, or neither 34. When a country allows trade and becomes an importer of a good, both domestic producers and domestic consumers become better off domestic producers become better off, and domestic consumers become worse off domestic producers become worse off, and domestic consumers become better off both domestic producers and domestic consumers become worse off d. 4. The figure illustrates the market for coffee in Guatemala Domestic demand 2 4 6 10 12 14 16 18 2 34 26 28 30 32 34 36 38 40 42 44 46 35. Refer to Figure 4. From the figure it is apparent that Guatemala will experience a shortage of coffee if trade is not allowed. Guatemala will experience a surplus of coffee if trade is not allowed. foreign countries have a comparative advantage in producing coffee, relative to a. b. c. Guatemala. d. Guatemala has a comparative advantage in producing coffee, relative to the re worldExplanation / Answer
Question 34
If a country become importer of a good then this implies that it can procure the good at lower price from rest of the world than it can be produced domestically.
So, imports lower price in domestic economy.
Lower prices due to imports benefit domestic consumers but hurt domestic producers.
Thus, domestic producers become worse-off and domestic consumers becomes better-off.
The correct answer is the option (c).
Question 35
The given figure shows that, at world price, domestic supply is greater than the domestic demand in Guatemala.
This means Guatemala will export coffee if trade is allowed.
A country exports a good only when it has comparative advantage in production of that good.
So, it can be stated that Guatemala has a comparative advantage in producing coffee, relative to the rest of the world.
The correct answer is the option (d).
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