refer to scenario 9-2 Scenario 9-2 For a small country called Boxland,the equati

Question

refer to scenario 9-2 Scenario 9-2 For a small country called Boxland,the equation of the dometic demand curve for cardboard is O- 200-2, wbare OP represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a toa of . For Boxland, the equation of the dometic supply curve for cardbourd is 03P where O reprosents the domestic quantity of cardboard supplied, in tons, and P again represents the prioe of a ton of cardbourd. Refer to Scenario 9.2 Suppose the woeld price of carboard is s60 Then Bosdand's gans rom international trade in cardbourd amount to O $145 Ob $160 O c. $210 ?d.S320

Explanation / Answer

Here under domestic domestic demand and domestic supply equilibrium price and quantity will be P=52 and Q=96. By equating Qd=200-P and Qs = -60 +3P . We get the above value of P =52, Qd=Qs=96. Now under world price of $60 the quantity supply will be 120 and quantity demand will be 80. So excess supply is 120 - 80 = 40. Now differences in price is 60 -52 =8. Therefore gains from trade is 40*8 =320. So the answer is d.

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