The small happy Kingdom of Pollyanna does not trade with the rest of the world, but uses U.S dollars for its currency. Its domestic price of tofu is $1 per pound and the Kingdom produces and consumes 5 tons of tofu. The world price of tofu is just $0.50 per pound. At this price, the Kingdom would produce only 2 tons of tofu and would consume 8 tons of tofu, and thus have to import 6 tons of tofu. What is the deadweight loss in the tofu market associated with the Kingdom staying closed to trade? (Note: 1 ton = 2000 lbs.)
The small happy Kingdom of Pollyanna does not trade with the rest of the world, but uses U.S dollars for its currency. Its domestic price of tofu is $1 per pound and the Kingdom produces and consumes 5 tons of tofu. The world price of tofu is just $0.50 per pound. At this price, the Kingdom would produce only 2 tons of tofu and would consume 8 tons of tofu, and thus have to import 6 tons of tofu. What is the deadweight loss in the tofu market associated with the Kingdom staying closed to trade? (Note: 1 ton = 2000 lbs.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The small happy Kingdom of Pollyanna does not trade with the rest of the world, but uses U.S dollars for its currency. Its domestic
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A deadweight loss is a cost to society created by market inefficiency, which occurs when supply and demand are out of equilibrium.
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