Question

Refer to the graph above for all questions assume the graph represents the domestic demand and supply of hammers

Price $22 Domestic Supply D E 10 -World Price Domestic Demand 050 135 Quantity Refer to the graph above for all the questions. Assume the graph represents the domestic demand and supply of 90 hammers and the horizontal line is the current world price of hammers. tic economy if trade does not take place? dollars. 14 QUESTION 2 0.6 points How many hammers do domestic firms produce each period when there is no trade with the rest of the world?

Answer 1

3) When the trade with rest of the world begins then the price falls from 14 to 10 since it is the world price,so the domestic producers will supply lesser quantity and produces 50 quantity

4) Similarly with the decrease in the price,the domestic consumers will demand more and quantity demanded increases to 135

5)As the quantity demanded is more than the quantity supplied so the country will have to import therefore,some of the hammers domestic consumers buy are imported