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

question 85

Multiple Choice

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.
-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.

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