What price will stabilize trade

Reference no: EM133288043

Case: The US and UK segments share the common vertical axis measuring cloth price (absolute) in dollar terms. The annual increments of fabric quantities are measured from the common origin, with a right-hand (as usual) movement for the USA and a left-hand movement for the United Kingdom. If we move from left to right as we should, notice that for England, Dc is negatively sloped and Sc is positively sloped.Considering Figure 3-20,

(a) What is the equilibrium price and equilibrium quantity of cloth in the absence of trade in England and the USA?

(b) What price will stabilize trade? How much fabric will be the subject of trade? How much cloth will be produced and consumed as a result of trade in both countries?

Reference no: EM133288043

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