Consider the market for soybeans:

Without trade, in a purely domestic United States market, soybeans sell for $394.00/metric ton, and quantity demanded domestically is 50 million tons. The market graph for the U.S. domestic soybean market would look like this:

Soybean Market P ($/ton)

$394.00

50 million Q (tons)

Now, consider that the market for soybeans is open to trade, and that the world price is 2,800 Chinese Yuan/metric ton. Further, the Chinese Yuan exchange rate for the U.S. Dollar is .14 (or put conversely, one U.S. Dollar is worth 7 Chinese Yuan).

1. With trade with China, what would the domestic price of soybeans be, and how many tons of soybeans would be exported?

1. Assuming the exchange rate decreased, and became .20 Dollar per Yuan, what effect would that have on the price and amount of soybeans exported?

1. What other information would you want to be able to make a fuller analysis of the soybean market and exchange rates with China?