Domestic Market for Steel, Alpha
Qs P Qd
60 5 10
40 4 20
30 3 30
20 2 40
10 1 50
Domestic Market for Steel, Beta
Qs P Qd
80 5 20
70 4 30
60 3 40
50 2 50
40 1 60
The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qs is the domestic quantity supplied, and Qd is the domestic quantity demanded. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price must be higher than $1 because at $1:.
A. Beta wants to import more than Alpha.
B. Alpha wants to export more than Beta.
C. Both nations want to export steel.
D. Both nations want to import steel.

The correct answer is option B: Alpha wants to export more than Beta

Explanation: Please refer to the picture attached for further details.

The picture clearly shows the real situation in graphical presentation that is the demand and supply (import and export) position for both countries, Alpha and Beta. Upon careful observation, the equilibrium price for Alpha is price 3 units while the equilibrium price for Beta is price 2. That follows from the information provided in the question  that the equilibrium world price must be higher than $1.

At $1 Beta's imports/quantity demanded (60 units) would be higher than what Alpha is exporting/supplying and hence there would be an excess of demand over supply. So option A is not obtainable.

At $1 Beta is ready to export as much as 40 units, while Alpha is ready to supply as much as 10 units. This too would give rise to an excess supply over demand, and that situation forces the equilibrium price to go downwards. So, "Alpha wants to export more than Beta" at $1 is not correct. This can only happen if the price is reviewed upwards, since a producer is only willing to supply more at higher prices (Law of supply). Therefore, the equilibrium world price must be higher than $1 because at $1 Alpha wants to export more than Beta.

1. c

2. b

3. a

4. c

5. a

6. b

7. c

8. c

9.b

10. d

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