1)The model of trade based on production possibilities frontiers consides the in
ID: 1153276 • Letter: 1
Question
1)The model of trade based on production possibilities frontiers consides the increase in unemployment which may occur from imports.
False
2)In which of the following situations would the quantity supplied to the market increase? A price ceiling
below the competitive equilibrium price in a competitive market.
3) Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $400 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1. If trade in tomatoes is not allowed, the price of tomatoes in the United States
4)
Scenario 9-1
The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $400 per ton. The U.S. is a price-taker in the tomatoes market.
Refer to Scenario 9-1. If trade in tomatoes is allowed, the price of tomatoes in the United States
Explanation / Answer
1) FALSE . Imports does not always causes increase in unemployment . The country exports the god in which it has a comparative advantage with respect to the other country and imports the other goods . This increases consumption point of both countries . If there is no full specialization , there will be no unemployment .
2) A price ceiling is only effective if it is placed below the equilibrium price in the market . In case of a natural monopoly increasing price will lead to decrease in profits since price is set at profit maximization point . So below the unregulated monopolist price, but above the firm's average total cost for a natural monopoly is the answer .
3) Since trade is not allowed , or US is closed economy so the domestic price will prevail . Domestic price will be greater than the world price.
4) Since US is price taker so after trade price will decrease to 400$ . will decrease, and this will cause consumer surplus to increase.
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