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The flowing graphes the same domestic supply and demand curves for times in Brat. Now, ppose that the rangement changes stance on international trade, deciding to allow free trade in mes. The horontal back ine (P) represents the wond price of mes at $800 per on that's entry into the world market for limes has no effect on the world price and there are no transportation ated with international trade in Imas Ali asume that domestic supplers will satisfy domestic demand as much as possible before any exporting or importing plac ther (unge symb) to shade in the area representing couer surples, and then use the purple angle (dam shade in the area representing producers Demand X HO QUANTITY of 101 P Com Por (2) When Brazil adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Brazil becomes $800. At this price, tons of limes will be demanded in Brazil, and tons will be supplied by domestic suppliers. Therefore, Brazil tons of limes. will export Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade (Dollars) Without Free Trade (Dollars) Consumer Surplus Producer Surplus When Brazil allows free trade, the country's producer surplus S by s and consumer surplus . Therefore, the net effect of allowing international trade on Brazil's total surplus is a of s by

The flowing graphes the same domestic supply and demand curves for times in Brat. Now, ppose that the rangement changes stance on international trade, deciding to allow free trade in mes. The horontal back ine (P) represents the wond price of mes at $800 per on that's entry into the world market for limes has no effect on the world price and there are no transportation ated with international trade in Imas Ali asume that domestic supplers will satisfy domestic demand as much as possible before any exporting or importing plac ther (unge symb) to shade in the area representing couer surples, and then use the purple angle (dam shade in the area representing producers Demand X HO QUANTITY of 101 P Com Por (2) When Brazil adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Brazil becomes $800. At this price, tons of limes will be demanded in Brazil, and tons will be supplied by domestic suppliers. Therefore, Brazil tons of limes. will export Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade (Dollars) Without Free Trade (Dollars) Consumer Surplus Producer Surplus When Brazil allows free trade, the country's producer surplus S by s and consumer surplus . Therefore, the net effect of allowing international trade on Brazil's total surplus is a of s by

Principles of Microeconomics (MindTap Course List)
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 3CQQ
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Based on the information from the previous graph, absent international trade total surplus is $ The following graph shows the same domestic supply and demand curves for limes in Brazil. Now, suppose that the Brazilian government changes its stance on international trade, deciding to allow free trade in limes. The horizontal black line (Pw) represents the world price of limes at $800 per ton. Assume that Brazil's entry into the world market for limes has no effect on the world price and there are no transportation or transaction costs associated with international trade in limes. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus. PRICE (Dollars per ton) 1000 900 800 700 600 500 400 300 200 100 0 O Domestic Demand 15 30 Domestic Supply P. 45 60 75 90 105 120 135 QUANTITY (Tons of limes) W 150 Consumer Surplus Producer Surplus When Brazil adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Brazil becomes $800. At this price, tons of limes will be demanded in Brazil, and tons will be supplied by domestic suppliers. Therefore, Brazil tons of limes. will export Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade (Dollars) Consumer Surplus Producer Surplus Without Free Trade (Dollars) When Brazil allows free trade, the country's producer surplus by $ Therefore, the net effect of allowing international trade on Brazil's total surplus is a and consumer surplus of $ by
Transcribed Image Text:Based on the information from the previous graph, absent international trade total surplus is $ The following graph shows the same domestic supply and demand curves for limes in Brazil. Now, suppose that the Brazilian government changes its stance on international trade, deciding to allow free trade in limes. The horizontal black line (Pw) represents the world price of limes at $800 per ton. Assume that Brazil's entry into the world market for limes has no effect on the world price and there are no transportation or transaction costs associated with international trade in limes. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus. PRICE (Dollars per ton) 1000 900 800 700 600 500 400 300 200 100 0 O Domestic Demand 15 30 Domestic Supply P. 45 60 75 90 105 120 135 QUANTITY (Tons of limes) W 150 Consumer Surplus Producer Surplus When Brazil adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Brazil becomes $800. At this price, tons of limes will be demanded in Brazil, and tons will be supplied by domestic suppliers. Therefore, Brazil tons of limes. will export Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade (Dollars) Consumer Surplus Producer Surplus Without Free Trade (Dollars) When Brazil allows free trade, the country's producer surplus by $ Therefore, the net effect of allowing international trade on Brazil's total surplus is a and consumer surplus of $ by
1. Welfare effects of free trade in an exporting country The following problem analyzes the Brazilian market for limes. The graph below shows the domestic supply and demand curves for limes in Brazil. Assume that Brazil's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Brazil without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. 1000 Domestic Demand Domestic Supply X PRICE (Dollars per ton) 900 800 700 600 500 400 300 200 100 0 0 15 30 60 75 90 105 QUANTITY (Tons of limes) 45 120 135 150 Equilibrium without Trade Consumer Surplus Producer Surplus
Transcribed Image Text:1. Welfare effects of free trade in an exporting country The following problem analyzes the Brazilian market for limes. The graph below shows the domestic supply and demand curves for limes in Brazil. Assume that Brazil's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Brazil without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. 1000 Domestic Demand Domestic Supply X PRICE (Dollars per ton) 900 800 700 600 500 400 300 200 100 0 0 15 30 60 75 90 105 QUANTITY (Tons of limes) 45 120 135 150 Equilibrium without Trade Consumer Surplus Producer Surplus
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