Assume That the World Price of Commodity X Is $9

question 20

Multiple Choice

Assume that the world price of Commodity X is $9 per unit while its domestic price is $8, and the marginal cost of production is $6 per unit.If the government imposes a price ceiling of $7 on domestic output:

• A)the import of Commodity X from the world market would stop.
• B)the world price of Commodity X would decline.
• C)a surplus of Commodity X would accumulate in the domestic market.
• D)a shortage of Commodity X would be observed in the domestic market.

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