Question

Question 32 (2 points) If the world price is higher than the domestic price Country should engage in import of the good Country should engage in export of the good O Country has a comparative advantage of the good Both B and C are correc Question 33 (2 points) Walance Work Pria 700 With trade and without a tariff, O the domestic price is equal to the world price. The price will be $4 in this market. There is a shortage of 400 unit in this market. This country will import 200 unit.
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Answer 1

32) If the world price is higher than the domestic price,

Then domestic producers will be willing to supply more. This means that the quantity supplied of the good will be higher than the quantity demanded domestically. The surplus produced within the country will be exported to the rest of the world. The lower price in the domestic market means that the country can produce the goods cheaper domestically, implying it has a comparative advantage in production. For further understanding, refer to the picture given below.

Ans: D)Both B and C are correct.

33)With Trade and Without Tariff,

In this case, the domestic consumers will begin to demand cheaper foreign goods (as the world price of $2 is lesser than the domestic price of $4). The domestic producers will be willing to supply only 100 units at this price, the remaining 400 units will be imported from the rest of the world. At this price of $2 which is the world price without tariff, there will be a shortage of 400 units in the domestic market.

Ans: C) There is a shortage of 400 unit in the market.