Suppose that a small country produces mushrooms for domestic consumption and possible export. The national demand and supply curves for mushrooms in this country are given by:
P= 60 - M (demand)
P= 20 + M (supply)
where P denotes the relative price of mushrooms and M denotes the quantity of mushrooms (in tons).
a. Illustrate these relationships graphically.
b. What are the autarky price and quantity exchanged?
c. Suppose that the world price of mushrooms is 45. Will this small country export mushrooms? If so, how many tons?