Question

The demand for apples in the U.S. is Qus = 800 - 20P, and Foreign Demand for apples is Qf = 1200 - 40P, where quantity demanded is measured in millions of bushels and price is in dollars per bushel. The world demand for apples is therefore
1. Q = 400 - 20P when P is $20 or less.

2. Q = 2000 - 60P when P is $30 or less.

3. Q = 2000 - 220P when P is $30 or less.

4. Q = 400 + 20P for all prices..

The world supply of apples is Qs = 200 + 30P. Therefore, the world equilibrium price for apples is $___ per bushel and the equilibrium quantity of apples is ___ million bushels.

At the equilibrium price, ___ million bushels will be sold in the U.S., and ___ million bushels will be sold in foreign markets

Answer 1

Answer:

Option (2) is correct.

$20; 800

400;400

Explanation:

Given that,

Demand for apples in the U.S. : Qus = 800 - 20P

Foreign Demand for apples: Qf = 1200 - 40P

World Demand for apples, Qwd

= Demand for apples in the U.S. + Foreign Demand for apples

= Qus + Qf

= 800 - 20P + 1200 - 40P

= 2,000 - 60P

Equilibrium price for apples is at a point where the world supply is equal to the world demand for apples:

Qwd = Qws

2,000 - 60P = 200 + 30P

1,800 = 90P

P = 20 ⇒ world equilibrium price for apples

Therefore,

world supply of apples is Qs = 200 + 30P

                                                = 200 + 30(20)

                                                = 200 + 600

                                                = 800

At equilibrium Pw = $20

Demand for apples in the U.S. : Qus = 800 - 20P

                                                            = 800 - 20(20)

                                                            = 800 - 400

                                                            = 400