When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothing. Suppose the following graph represents the market for clothing in Cambodia prior to the expansion of China's clothing industry. Cambodia is anof clothing because the world price isthe domestic equilibrium price.Note: You will have to use green points (triangle symbol) and purple points (diamond symbol) to shade the consumer and producer surplus areas onthe following graphs. There are two green points and two purple points per graph. Use either one point of both to most accurately indicate the areas.For example, if indicating the consumer surplus requires only one green point, leave the second one on the palette.Use the green point (triangle symbol) to shade consumer surplus in Cambodia before China's clothing industry expands. Then use the purple point(diamond symbol) to shade producer surplus.(?Market for Clothing in CambodiaDomestic DemandAConsumer SurplusDomestic SupplyWorld PriceProducer SurplusOuantity of ClothingPrice of Clothing Quantity of ClothingOn the following graph, use the green point (triangle symbol) to shade consumer surplus in Cambodia after China's clothing industry expands. Thenuse the purple point (diamond symbol) to shade producer surplus.Market for Clothing in CambodiaDomestic DemandAConsumer SurplusDomestic SupplyNew World PriceProducer SurplusQuantity of ClothingSuppose the following graph represents the market of clothing in Denmark prior to the expansion of China's clothing industry. Denmark is anof clothing because the world price isthe domestic equilibrium price.Price of Clothing

Answered: When China's clothing industry expands,…

When China's clothing industry expands, the increase in world supply lowers the world price of clothing. Consider the effects this has on both an importer and an exporter of clothin

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 8PA

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Two countries, Marland and Teckana, can produce either clothing or food using all their available resources at constant opportunity cost. The table below shows the daily production of clothing or food in Marland and Teckana. Clothing Food Marland 120 20 Teckana 80 20 (a) Which country has the absolute advantage in producing food? Explain. (b) Which country has the comparative advantage in producing food? Explain. (c) Assume the two countries specialize based on their comparative advantage. If the two countries engage in trade and one unit of food is exchanged for 5 units of clothing, will these terms of trade be mutually beneficial? Explain. (d) Suppose Teckana invented new equipment to only increase the production of clothing. (i) Draw a correctly labeled graph of Teckana’s initial production possibilities curve, with clothing on the horizontal axis and food on the vertical axis. Plot the numerical values above on the graph. (ii) Show the effect of the new…
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