If the World Price Is Less Than the Domestic Price

question 36

Multiple Choice

If the world price is less than the domestic price of a commodity in a closed economy,then when that country begins to trade,the country will ____________ the commodity.

• A) stop consuming
• B) stop producing
• C) be self-sufficient in
• D) become a net importer of
• E) become a net exporter of

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Definitions:

Absolute Value

The non-negative value of a number regardless of its sign.

Elasticity

a measure of how much the quantity demanded or supplied of a good responds to a change in one of its determinants, such as price.

Quantity Effect

The change in quantity demanded or supplied as a result of changes in price.

Price Effect

The impact that a change in the price of a good or service has on its demand or supply.