With access to low-priced imports from abroad, American consumers will purchase significantly more lumber. • What is the world price of lumber? What is the new quantity demanded by domestic consumers?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
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Chapter1: Making Economics Decisions
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Dollars per thousand board feet
Chapter 9 - International Trade
Tariffs
Below is a graph depicting the US lumber market. In the domestic market,
the domestic equilibrium price and quantity without international trade are
$1,000 and 40 million boards, respectively.
When the US opens to international trade, the world price is substantially lower than
the domestic price, meaning that the US does not have a comparative advantage in
lumber and it will therefore import lumber from Canada.
The US Lumber Market
$2,000
$1,800
$1,600
$1,400
$1,200
$1,000
$800
$600
Imports
World Price
$400
$200
$0
10
20
30
40
50 60
70
80
90
100
Millions of board feet
With access to low-priced imports from abroad, American consumers will purchase
significantly more lumber.
• What is the world price of lumber?
What is the new quantity demanded by domestic consumers?
These consumers are significantly better off with the new access to cheap lumber.
Domestic producers, on the other hand, lose a large degree of surplus from the imports.
Many domestic firms are no longer able to compete with the foreign production and
will either leave the market or decrease production.
Transcribed Image Text:*** Dollars per thousand board feet Chapter 9 - International Trade Tariffs Below is a graph depicting the US lumber market. In the domestic market, the domestic equilibrium price and quantity without international trade are $1,000 and 40 million boards, respectively. When the US opens to international trade, the world price is substantially lower than the domestic price, meaning that the US does not have a comparative advantage in lumber and it will therefore import lumber from Canada. The US Lumber Market $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 Imports World Price $400 $200 $0 10 20 30 40 50 60 70 80 90 100 Millions of board feet With access to low-priced imports from abroad, American consumers will purchase significantly more lumber. • What is the world price of lumber? What is the new quantity demanded by domestic consumers? These consumers are significantly better off with the new access to cheap lumber. Domestic producers, on the other hand, lose a large degree of surplus from the imports. Many domestic firms are no longer able to compete with the foreign production and will either leave the market or decrease production.
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