Question

Which of the following would be true given the price in the world market is $3 ?

Country A Country B
Price Quantity demande Quantity supplied Price Quantity demande Quantity supplied
2 40 0 0 20 0
3 30 10 1 15 5
4 20 20 2 10 10
5 10 30 3 5 15
6 0 40 4 0 20

А Neither country would export coffee.
B Neither country would import coffee
С Country A would import 20 units of coffee, and Country B would export 10
D Country A would export 20 units of coffee, and Country B would import 10
E Given the demand and supply schedules, $3 cannot be an equilibrium global price.

Answer 1

The correct trade scenario at a world market price of $3 is Country A importing 20 units of coffee, and Country B exporting 10 units. This conclusion is reached by comparing the quantity demanded and supplied for each country at that price point.

Step-by-step explanation:

The direct answer to which trade scenario would be correct if the world market price is $3 is: Country A would import 20 units of coffee, and Country B would export 10.

Analyzing the provided tables for Country A and Country B, we observe at a world market price of $3, Country A's quantity demanded is 30 units, and the quantity supplied is 10 units. This creates a deficit of 20 units (30-10=20), indicating Country A would need to import 20 units of coffee. For Country B, the demand at $3 is 15 units, whereas the supply is 25 units, leading to an excess of 10 units (25-15=10), which suggests Country B would export 10 units. By confirming these numbers with the tables, it becomes clear that option C, "Country A would import 20 units of coffee, and Country B would export 10" is indeed the correct scenario. The equilibrium here reflects the balance between supply and demand when trade is permitted, highlighting that Country A must import to meet its demand, while Country B has a surplus to export.