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Assignment: International Trade
A) Assess the impact of IMPORTS, assuming that the world price is below the domestic price:
• If the world price is below the domestic price, what do imports do to the domesticsupply of roses• What does the increased supply of imported roses do to the domestic price ofroses? • What does the lower price do to domestic producers' incentive to produce? • What does a lower price do to the quantity demanded by domestic consumers?• Does the amount of consumer surplus increase or decrease? • What happens to domestic producer surplus?
B) Assess the impact of EXPORTS on domestic supply and demand, assuming that the world price is higher than the domestic price:
• If the world price is higher than the domestic price, what will domestic producerswant to do? • What does the quantity exported do to the domestic price? • What does a higher domestic price do to the quantity consumed domestically?• What has happened to the domestic consumer surplus? • What has happened to the domestic producer surplus?
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