Consider a Market That Is Initially in Equilibrium with Quantity

question 108

Multiple Choice

Consider a market that is initially in equilibrium with quantity demanded equal to quantity supplied at a price of $20. If the world price of the good is $10 and the country opens up to international trade then in this market then

• A) imports will increase, the price will fall, and the quantity supplied will fall.
• B) exports will increase, the price will be unchanged, and the quantity supplied will increase.
• C) imports will increase, the price will decrease, and the supply curve will shift to the left.
• D) the quantity demanded will decrease, the quantity supplied will decrease, and the price will decrease.

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Definitions:

Taxed Away

Refers to the reduction in income or resources that occurs as a result of taxation.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable.

Monopoly

A market structure characterized by a single seller dominating the market, with no close substitutes for the product or service offered, leading to limited competition.

Average Cost

The total cost of production divided by the number of goods produced, representing the cost per unit of output.