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Trey4sho Trey4sho
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The Gains and Losses to an Exporting Country

The graph shows the market for Swiss chocolates in Switzerland.
 

Assume that P1=$4.00, P2=$5.00, P3=$8.25, P4=$14.75, Q1=75, Q2=105, and Q3=300. With international trade, producers in Switzerland produce ________ chocolates at a price of ________.  ________ chocolates are sold at home and ________ chocolates are sold abroad. In Switzerland, ________ gain and ________ lose.

▸ 75, $8.25, 300, 75, consumers, producers

▸ 75, $5.00, 300, 75, producers, consumers

▸ 300, $8.25, 75, 225, producers, consumers

▸ 300, $5.00, 75, 225, consumers, producers
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Macroeconomics


Edition: 3rd
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KFordKFord
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300, $8.25, 75, 225, producers, consumers

With no international trade, equilibrium occurs where supply equals demand, at a quantity of 105 (Q2) and a price of $5.00 (P2).

With international trade, producers in Switzerland can sell all they want at the world price, so they will sell 300 chocolates (Q3) at a price of $8.25 (P3) (the world price).

At this price, domestic consumers demand 75 chocolates (Q1) and the remaining amount is sold abroad (Q3 - Q1 = 300 - 75 = 225.

In Switzerland, producers gain and consumers lose (both due to the higher price).
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