Asked by Mollie Williams on Jul 16, 2024
Verified
Refer to Figure 9.5.2 above. At free trade, domestic consumption is:
A) 5500; domestic production is 1000; imports are 4500.
B) 5000; domestic production is 2000; imports are 3000.
C) 4000; domestic production is 4000; imports are 0.
D) 2000; domestic production is 5000; imports are 3000.
E) 1000; domestic production is 5500; imports are 4500.
Domestic Consumption
The aggregate sum of products and services used within the boundaries of a nation.
Domestic Production
The total value of all goods and services produced within a country's borders.
Imports
Goods or services brought into one country from another for sale, often subject to tariffs, quotas, and trade agreements.
- Calculate the effects of tariffs and quotas on domestic production, consumption, imports, and exports.
Verified Answer
AE
Amber EveryJul 18, 2024
Final Answer :
A
Explanation :
At free trade, domestic consumption includes both the domestically produced goods and the imported goods. The correct choice indicates that domestic consumption is at its highest (5500), domestic production is at its lowest (1000), and imports are necessary to meet the remaining demand (4500), which aligns with a typical scenario of free trade where domestic demand exceeds domestic supply, leading to high imports.
Learning Objectives
- Calculate the effects of tariffs and quotas on domestic production, consumption, imports, and exports.