question 52\nthe domestic market for automobiles is in long - run equilibrium with a downward - sloping…

question 52\nthe domestic market for automobiles is in long - run equilibrium with a downward - sloping demand curve (comprised of domestic buyers) and an upward - sloping supply curve (comprised of domestic producers). assume the domestic market is opened to international trade. what will be the impact on the domestic market price (price), domestic market quantity (quantity), domestic quantity supplied (qs), and domestic quantity demanded (qd) as a result of the availability of imported foreign cars in the automobile market?\n\na) price: increase quantity: increase qs: increase qd: increase\n\nb) price: decrease quantity: decrease qs: decrease qd: decrease\n\nc) price: decrease quantity: increase qs: increase qd: increase\n\nd) price: decrease quantity: increase qs: no change qd: increase\n\ne) price: decrease quantity: increase qs: decrease qd: increase

question 52\nthe domestic market for automobiles is in long - run equilibrium with a downward - sloping demand curve (comprised of domestic buyers) and an upward - sloping supply curve (comprised of domestic producers). assume the domestic market is opened to international trade. what will be the impact on the domestic market price (price), domestic market quantity (quantity), domestic quantity supplied (qs), and domestic quantity demanded (qd) as a result of the availability of imported foreign cars in the automobile market?\n\na) price: increase quantity: increase qs: increase qd: increase\n\nb) price: decrease quantity: decrease qs: decrease qd: decrease\n\nc) price: decrease quantity: increase qs: increase qd: increase\n\nd) price: decrease quantity: increase qs: no change qd: increase\n\ne) price: decrease quantity: increase qs: decrease qd: increase

Answer

Brief Explanations:

When the domestic market is opened to international trade and imported foreign cars are available, the overall supply in the market increases (domestic + foreign - supply). With a downward - sloping demand curve, an increase in supply leads to a decrease in price. As price decreases, quantity demanded (QD) by domestic consumers increases according to the law of demand. Domestic producers, facing lower prices, will supply less (QS decreases). The overall quantity in the market (domestic + foreign - produced) increases.

Answer:

E. Price: Decrease Quantity: Increase QS: Decrease QD: Increase