What is meant by world price of a good? How do the domestic price ...

[washai]

What is meant by world price of a good? How do the domestic price and the world price of a good together determine whether a country will be an importer or exporter of a certain good?
 
  What will be an ideal response?

Question 2

In the figure above, an
 
  A) efficient output results, but the firm incurs a loss per household which must be subsidized in some way.
  B) inefficient output results, though the firm covers its costs.
  C) efficient output results, though marginal costs exceed average total costs.
  D) inefficient output results because the firm cannot cover its costs.
  E) efficient output results because consumer surplus is maximized.

[angrybirds13579]

Answer to Question 1

The world price of a good is the prevailing price of the good in the world market. The domestic price and the world price of a good play an important role in determining whether a country will export the good or import the good. If the domestic price of a good in a country is lower than the world price of the good, the country should export the good. On the contrary, if the domestic price of a good is higher than the world price of the good, the country should import the good.

Answer to Question 2

A

[washai]

Wow, this really help

[tandmlomax84]

Great answer, keep it coming