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The Figure Below Shows the Demand (D) and Supply (S)

question 85

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The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market.Figure 21.1
In the figure,
P1: Price of the good in the international market.P2: Price of the good in the domestic market after the imposition of tariff by the government.P3: No-trade price of the good in the domestic market. The figure below shows the demand (D)  and supply (S)  curves of a good produced domestically in an economy as well as traded in the international market.Figure 21.1 In the figure, P<sub>1</sub>: Price of the good in the international market.P<sub>2</sub>: Price of the good in the domestic market after the imposition of tariff by the government.P<sub>3</sub>: No-trade price of the good in the domestic market.   -If the world price of a good is lower than its domestic equilibrium price, the country will: A) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. B) export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically. C) import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers. D) export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically. E) import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers.
-If the world price of a good is lower than its domestic equilibrium price, the country will:

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Definitions:

Law of Demand

The law of demand states that, all else being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.

Quantity Demanded

The complete volume of a particular good or service that purchasers are both eager and financially able to acquire at a certain price within a market.

Price Increases

Situations where the cost of goods or services rise, often reflecting inflation or increased production costs.

Cancer-Causing Particles

Substances or elements that, upon exposure, increase the risk of developing cancer in living tissues.

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