Consider that Australia and the United Kingdom produce and trade wine. In Australia, the domestic market for wine is described by the equations: Q = 95 - 0.05P and Q = 50 + 0.025P, where P is the price (converted to US dollars) for a case of wine and Q is the number of cases of wine is thousands. Similarly, in the United Kingdom, the domestic market for wine is described by the equations: Q = 55 - 0.05P and Q = 25 + 0.025P, where P is the price (converted to US dollars) for a case of wine and Q is the number of cases of wine is thousands. Currently, there is no trade agreement on wine between the countries, and these domestic markets are in equilibrium. Now consider that the two countries enter a trade agreement (free trade) where the world price of wine is $500 per case. Which of the following statements describes the market for wine in the United Kingdom that resulted from the free trade agreement? The United Kingdom will export wine. Compared to the market outcome before trade, consumers gain while producers lose from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers gain while producers gain from the agreement. The United Kingdom will export wine. Compared to the market outcome before trade, consumers lose while producers lose from the agreement. The United Kingdom will export wine. Compared to the market outcome before trade, consumers lose while producers gain from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers lose while producers gain from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers gain while producers lose from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers lose while producers lose from the agreement. The United Kingdom will export wine. Compared to the market outcome before trade, consumers gain while producers gain from the agreement.
Consider that Australia and the United Kingdom produce and trade wine. In Australia, the domestic market for wine is described by the equations: Q = 95 - 0.05P and Q = 50 + 0.025P, where P is the price (converted to US dollars) for a case of wine and Q is the number of cases of wine is thousands. Similarly, in the United Kingdom, the domestic market for wine is described by the equations: Q = 55 - 0.05P and Q = 25 + 0.025P, where P is the price (converted to US dollars) for a case of wine and Q is the number of cases of wine is thousands. Currently, there is no trade agreement on wine between the countries, and these domestic markets are in equilibrium. Now consider that the two countries enter a trade agreement (free trade) where the world price of wine is $500 per case. Which of the following statements describes the market for wine in the United Kingdom that resulted from the free trade agreement? The United Kingdom will export wine. Compared to the market outcome before trade, consumers gain while producers lose from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers gain while producers gain from the agreement. The United Kingdom will export wine. Compared to the market outcome before trade, consumers lose while producers lose from the agreement. The United Kingdom will export wine. Compared to the market outcome before trade, consumers lose while producers gain from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers lose while producers gain from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers gain while producers lose from the agreement. The United Kingdom will import wine. Compared to the market outcome before trade, consumers lose while producers lose from the agreement. The United Kingdom will export wine. Compared to the market outcome before trade, consumers gain while producers gain from the agreement.
Chapter4: Markets In Action
Section: Chapter Questions
Problem 1SQP
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Transcribed Image Text:Consider that Australia and the United Kingdom produce and trade wine. In Australia, the domestic market for
wine is described by the equations: Q = 95 - 0.05P and Q = 50 + 0.025P, where P is the price (converted to US
dollars) for a case of wine and Q is the number of cases of wine is thousands. Similarly, in the United Kingdom, the
domestic market for wine is described by the equations: Q = 55 - 0.05P and Q = 25 + 0.025P, where P is the price
(converted to US dollars) for a case of wine and Q is the number of cases of wine is thousands. Currently, there is
no trade agreement on wine between the countries, and these domestic markets are in equilibrium.
Now consider that the two countries enter a trade agreement (free trade) where the world price of wine is $500
per case.
Which of the following statements describes the market for wine in the United Kingdom that resulted from the
free trade agreement?
The United Kingdom will export wine. Compared to the market outcome before trade, consumers gain while
producers lose from the agreement.
The United Kingdom will import wine. Compared to the market outcome before trade, consumers gain while
producers gain from the agreement.
The United Kingdom will export wine. Compared to the market outcome before trade, consumers lose while
producers lose from the agreement.
The United Kingdom will export wine. Compared to the market outcome before trade, consumers lose while
producers gain from the agreement.
The United Kingdom will import wine. Compared to the market outcome before trade, consumers lose while
producers gain from the agreement.
The United Kingdom will import wine. Compared to the market outcome before trade, consumers gain while
producers lose from the agreement.
The United Kingdom will import wine. Compared to the market outcome before trade, consumers lose while
producers lose from the agreement.
The United Kingdom will export wine. Compared to the market outcome before trade, consumers gain while
producers gain from the agreement.
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