Quiz_3_McWilliams_Answers

Quiz_3_McWilliams_Answers - Economics 101 Section 400...

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Economics 101 Section 400 Winter 2010 Quiz 3 For discussion in section, March 11 and 12 Name:______________________________________ Section:________________ Consider the market for widgets, shown in the diagram below. The curves show domestic supply and demand for widgets in a typical month. (a) If domestic agents are free to buy or sell as many units as they wish on the world market at a price of $4/widget (i.e. P W = $4), will the domestic economy import or export of widgets? How many widgets will be consumed domestically? How many widgets will be produced domestically? What quantity of widgets will be imported or exported? At the world price of $4/widget, the domestic economy will import since there is excess demand with respect to domestic production – imports will fill that gap. Domestic producers want to sell at the highest price possible, but consumers will not buy domestic widgets at prices above $4 since they can consume imported widgets instead. Therefore, domestic producers sell at P
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This note was uploaded on 04/20/2010 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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Quiz_3_McWilliams_Answers - Economics 101 Section 400...

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