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This question will measure your ability to understand an economic passage and put it into quantitative work. Hence, please read carefully and try to draw graphs where possible.
Consider pepper jack cheese and parmesan cheese markets for the US. The domestic market equilibrium price and quantity for pepper jack is $10 and 100 respectively. On the other hand The domestic market equilibrium price and quantity for parmesan is $15 and 150respectively. The world price of pepper jack is $12 and world price of parmesan is $10. Assume that the US does not have any power to effect the price level in the world. Assume the US opens up to international production for both of these goods.
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