Please answer this question. Thank you! The figure to the right shows curves rep
ID: 1137923 • Letter: P
Question
Please answer this question. Thank you!
The figure to the right shows curves representing the average cost of golf clubs produced in Scotland (ACs) and Malaysia (ACM) as well as the Malaysian demand (DM) and the world demand (D world for golf clubs. 19 External Economics and Losses from Trade Price, Cost (per club) Assuming that Scotland's historical association with golf led it to first manufacture golf clubs, this figure indicates that Malaysia will import clubs from Scotland rather than produce clubs themselves since Malaysian producers can initially produce clubs OA only with Scotland's permission P2 only after paying royalties to Scotland. AC O at cost Co, which exceeds Scotland's price P O ACM at cost Co, which exceeds their price P2 World If no trade in golf clubs were allowed and Malaysia were forced to be self-sufficient, then OA Malaysian golfers would benefit. O Malaysian golfers would suffer O Malaysian club producers would go bankrupt O Malaysian producers and players would both benefit Quantity of clubsExplanation / Answer
19. If, by historical accident, scottish golf club producers are first to be established, Malaysian club producers will be unable to get their "foot in the door" since any new Malaysian start up firm will have an average cost higher than the prevailing scottish price.
So Malaysia will import clubs from Scotland rather than..
ans- at cost C0 , which exceeds Scotland's price P1.
So correct ans is c).
If no trade in golf club were allowed and Malaysia were forced to be self sufficient, then
Malaysian producers and players would both benefit.
It is so because as the trade is not allowed, Malaysia will produce in their own country and the golf club would be available at a price P2 which is less than P1 (price of Scotland).
Also as people now purchase from the Malaysia's producers due to ban on imports so it will also benefit producers and also players.
Correct ans is D) Malaysian producers and players would both benefit.