Wholesalers buy and sell roses in containers that hold 120 stems. The table prov
ID: 1209468 • Letter: W
Question
Wholesalers buy and sell roses in containers that hold 120 stems. The table provides information about the wholesale market for roses in the United States. The demand schedule is the wholesalers’ demand and the supply schedule is the U.S. rose growers’ supply.
Wholesalers can buy roses at auction in Aalsmeer, Holland, for $125 per container.
A. Without international trade, what would be the price of a container of roses and how many containers of roses a year would be bought and sold in the United States?
B. At the price in your answer to part (a), does the United States or the rest of the world have a comparative advantage in producing roses?
Use the information on the U.S. wholesale market for roses in Problem 1 to (info is above)
A. Explain who gains and who loses from free international trade in roses compared to a situation in which Americans buy only roses grown in the United States.
B. Calculate the value of the roses imported into the United States.
Price ($ per container) Quantity Demanded Quantity Supplied (millions of containers per year) (millions of containers per year) 100 15 0 125 12 2 150 9 4 175 6 6 200 3 8 225 0 10Explanation / Answer
A. Without international trade, price in the US will be $ 175 because at this price, quantity demanded is equal to quantity supplied. Equilibrium quantity sold is 6 units.
B. Since, Holland provide same container at $ 125 while in the U.S it costs $ 175 so, Holland or the rest of the world have a comparative advantage in producing roses.
A. Consumers of US gains with international trade as they are able to buy container of roses at less price i.e. $ 125 while producers of the US looses as there sale decreases due to international trade.
If Americans purchase roses from the US only then it will cost $ 175 to americans.
B. At world price of $ 125, quantity demanded is 12 units while quantity supplied in the US is only 2 units. So, 10 units will be imported from rest of the world into the United States.
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