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Consider a two‑nation world consisting of the United States and Mexico, which both produce strawberries. Assume there are no trade barriers or international transportation costs. The tables represent the markets for strawberries in the United States and Mexico. Mexican prices have been converted to U.S. dollars.

Price per pound Quantity supplied (in millions) Quantity demanded (in millions)
$2 300 500
$3 350 450
$4 400 400
$5 450 350
$6 500 300
$7 550 250
$8 600 200


Price per pound Quantity supplied (in millions) Quantity demanded (in millions)
$2 400 800
$3 450 750
$4 500 700
$5 550 650
$6 600 600
$7 650 550
$8 700 500

Required:
a. What is the equilibrium world price per pound?
b. What is the equilibrium quantity of exports and imports?
c. Which country will export strawberries?

a. United States
b. Mexico

Respuesta :

anthougo

Answer:

a. The equilibrium world price per pound is $5.

b. The equilibrium quantity of exports and imports is 1,000 pounds.

c. The country that will export strawberries is:

a. United States

Explanation:

Price per      Quantity supplied                          Quantity demanded

pound      US (in millions) Mexico World      US (in millions) Mexico  World

$2           300                     400      700        500                    800      1,300

$3           350                     450      800        450                    750      1,550

$4           400                     500     900        400                     700      1,100

$5           450                    550   1,000        350                     650      1,000

$6           500                    600   1,100         300                     600       900

$7           550                    650   1,200        250                     550       800

$8           600                    700   1,300        200                     500       700

b) At equilibrium when the world quantity supplied and demanded are equal, the world price per pound is $5 and the quantity demanded and supplied equaled 1,000 pounds respectively.  At this equilibrium, the United States will export 100 pounds (450 - 350) of strawberry to meet the excess demand of 100 pounds by Mexico (650 - 550).

The equilibrium world price per pound is $5. The equilibrium quantity of exports and imports is 1,000 pounds and the country that will export strawberries is the United States.

From the table given, it can be deduced that the equilibrium quantity of exports and imports is 1000 units. This is the quantity at which the quantity demanded and supplied are equal.

Based on the information, it can be deduced that the United States will export strawberries in order to meet the excess demand.

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