A country that produces paper is a price taker in the world paper market. The world price is pw: Suppose that the industry is not polluting. onor The domestic supply curve, S, is upward sloping, but the home country can ntj import as much as it wants at the world price, pw: In the free-trade equilibrium, e1, the equilibrium quantity is Q1 and the equilibrium price is the world price, pw- With a ban on imports, the equilibrium is e,, quantity falls to Q2, and price rises to p2- mes How do we know that winners from trade can compensate losers and still have Pw enough left over to benefit themselves? The winners from trade can compensate the losers and still have enough left over to benefit themselves because, with free trade, O A. consumer surplus increases by more than producer surplus decreases. Q2 Q1 Q, Tons per year O B. consumer surplus increases by more than deadweight loss increases. O C. producer surplus increases by more than consumer surplus decreases. O D. producer surplus increases by more than deadweight loss increases. O E. consumer surplus and producer surplus both increase. P. $ per ton
A country that produces paper is a price taker in the world paper market. The world price is pw: Suppose that the industry is not polluting. onor The domestic supply curve, S, is upward sloping, but the home country can ntj import as much as it wants at the world price, pw: In the free-trade equilibrium, e1, the equilibrium quantity is Q1 and the equilibrium price is the world price, pw- With a ban on imports, the equilibrium is e,, quantity falls to Q2, and price rises to p2- mes How do we know that winners from trade can compensate losers and still have Pw enough left over to benefit themselves? The winners from trade can compensate the losers and still have enough left over to benefit themselves because, with free trade, O A. consumer surplus increases by more than producer surplus decreases. Q2 Q1 Q, Tons per year O B. consumer surplus increases by more than deadweight loss increases. O C. producer surplus increases by more than consumer surplus decreases. O D. producer surplus increases by more than deadweight loss increases. O E. consumer surplus and producer surplus both increase. P. $ per ton
Chapter28: International Trade
Section: Chapter Questions
Problem 9P
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Transcribed Image Text:A country that produces paper is a price taker in the world paper market. The
world price is pw: Suppose that the industry is not polluting.
onor
The domestic supply curve, S, is upward sloping, but the home country can
nti import as much as it wants at the world price, pw. In the free-trade equilibrium,
e1, the equilibrium quantity is Q, and the equilibrium price is the world price, pw-
With a ban on imports, the equilibrium is e2, quantity falls to Q2, and price rises
to P2
P2
How do we know that winners from trade can compensate losers and still have
enough left over to benefit themselves?
mes
The winners from trade can compensate the losers and still have enough left
over to benefit themselves because, with free trade,
O A. consumer surplus increases by more than producer surplus decreases.
Q2 Q1
Q, Tons per year
O B. consumer surplus increases by more than deadweight loss increases.
O C. producer surplus increases by more than consumer surplus decreases.
O D. producer surplus increases by more than deadweight loss increases.
O E. consumer surplus and producer surplus both increase.
.....
p, $ per ton
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