Asked by Sienna Capellas on May 07, 2024
Verified
Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will
A) have a domestic surplus of copper.
B) export copper.
C) import copper.
D) neither export nor import copper.
Domestic Price
The price of goods or services within a country's borders, as opposed to their price in international markets.
World Price
The internationally agreed upon price of a commodity, influenced by global supply and demand dynamics.
No-International-Trade Price
The price level of goods within a country in the absence of international trade, often influenced solely by domestic supply and demand.
- Examine the impact of domestic and world prices on import and export behaviors.
Verified Answer
CF
Chelysamira FigueroaMay 09, 2024
Final Answer :
C
Explanation :
The United States will import copper because the world price of copper ($1.00) is lower than the domestic price ($1.20). This makes it cheaper for the United States to buy copper from the world market rather than produce it domestically.
Learning Objectives
- Examine the impact of domestic and world prices on import and export behaviors.