The small nation of Capralia has an abundant stock of Pashmina goats, a breed that yields high‑quality cashmere. Capralia's authorities are still debating whether to open their economy to international trade. The international price of cashmere is $70,000 per metric ton, and the Capralian cashmere sells for $50,000 per metric ton. 100908070605040302010Capralia's Domestic Cashmere Market6domestic supplydomestic equilibriumdomestic demand12 18 24 30 36 42Quantity (thousands of metric tons)48 54 60▲CSPS Predict what Capralia will do based on the information given in the graph.Capralia will export 12,000 metric tons of cashmere.Capralia will import 36,000 metric tons of cashmere.Capralia will import 24,000 metric tons of cashmere.Capralia will not engage in international trade.Capralia will export 24,000 metric tons of cashmere.

The difference between consumer willingness to pay and what he pays is consumer surplus(CS). The difference between the actual price received by the producer and the least price producer receives is known as producer surplus(PS).Given, the domestic price of cashmere is $50000 and the domestic quantity is 24000. The international price of cashmere is $ 70000. In the above diagram, equilibrium is where domestic supply and domestic demand is intersecting. When a country opens its economy for trade, the price of cashmere will rise to $70000.At the new price, the domestic demand falls to 12000 and domestic supply rises to 36000. Domestic consumer will decreases the demand because they are getting cashmere at a high price while producers will increase the supply to earn more profits. It creates an excess supply of 24000. The excess supply of 24000 will be exported by the producer to earn more profits. Thus, alternative e is correctAlternatives a, b , c, and d are not true because the country is experiencing excess supply which will be exported.The international price of cashmere ($70000) is more than the domestic price($50000). It will create a situation of excess supply. So, the country will export an excess supply of 24000. Thus, alternative e is true.