Consider a two‑nation world consisting of the United States and Mexico, which both produce strawberries. Assume there are no trade barriers or international transportation costs. The tables represent the markets for strawberries in the United States and Mexico. Mexican prices have been converted to U.S. dollars. What is the equilibrium world price per pound? What is the equilibrium quantity of exports and imports? Which country will export strawberries?
Consider a two‑nation world consisting of the United States and Mexico, which both produce strawberries. Assume there are no trade barriers or international transportation costs. The tables represent the markets for strawberries in the United States and Mexico. Mexican prices have been converted to U.S. dollars. What is the equilibrium world price per pound? What is the equilibrium quantity of exports and imports? Which country will export strawberries?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider a two‑nation world consisting of the United States and Mexico, which both produce strawberries. Assume there are no trade barriers or international transportation costs. The tables represent the markets for strawberries in the United States and Mexico. Mexican prices have been converted to U.S. dollars.
What is the
What is the
Which country will export strawberries?
Transcribed Image Text:**U.S. Market for Strawberries**
| Price per Pound | Quantity Supplied (in millions) | Quantity Demanded (in millions) |
|-----------------|--------------------------------|--------------------------------|
| $2 | 300 | 500 |
| $3 | 350 | 450 |
| $4 | 400 | 400 |
| $5 | 450 | 350 |
| $6 | 500 | 300 |
| $7 | 550 | 250 |
| $8 | 600 | 200 |
**Mexican Market for Strawberries**
| Price per Pound | Quantity Supplied (in millions) | Quantity Demanded (in millions) |
|-----------------|--------------------------------|--------------------------------|
| $2 | 400 | 800 |
| $3 | 450 | 750 |
| $4 | 500 | 700 |
| $5 | 550 | 650 |
| $6 | 600 | 600 |
| $7 | 650 | 550 |
| $8 | 700 | 500 |
### Analysis
The tables compare the quantity of strawberries supplied and demanded at various prices in the U.S. and Mexican markets.
- **U.S. Market**:
- Equilibrium occurs at $4 per pound where the quantity supplied equals the quantity demanded (400 million pounds).
- As the price increases from $2 to $8, the quantity supplied increases and the quantity demanded decreases.
- **Mexican Market**:
- Equilibrium occurs at $6 per pound where the quantity supplied equals the quantity demanded (600 million pounds).
- Similar to the U.S. market, the quantity supplied increases, and the quantity demanded decreases as prices rise.
These trends showcase the law of supply and demand, where higher prices generally lead to a greater quantity supplied and a lower quantity demanded.
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