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If the normalization of trade relations between the U
If the normalization of trade relations between the U.S. and Cuba legalizes the sale of Cuban cigars in our country, it would:
a. increase equilibrium price and decrease equilibrium quantity for Cuban cigars.
b. decrease equilibrium price and increase equilibrium quantity for Cuban cigars.
c. increase both the equilibrium price and quantity for Cuban cigars.
d. decrease both the equilibrium price and quantity for Cuban cigars.
Expert Solution
The correct answer is b. decrease equilibrium price and increase equilibrium quantity for Cuban cigars.
When trade relations with Cuba normalize, the number of Cuban cigars in the market will increase. This means that the number of cigars in the market will increase and due to this increased quantity, the price will fall.
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