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The following graph shows the same domestic demand and supply curves for tangerines in Guatemala. Suppose that the Guatemalan govemment changes its international trade policy to alloa free trade in tangerines. The horizontal black line (Pw) represents the world price of tangerines at $500 per ton. Assume that Guatemala's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. 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 consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. Domestic Demand Domestic Supply 620 590 Consumer Surplus 560 530 500 Producer Surplus 470 440 410 380 350 320 O 25 s0 75 100 125 150 175 200 225 250 QUANTITY (Tons of tangerines) when Guatemala allows free trade of tangerines, the price of a ton of tangerines in Guatemala will be $500. At this price. [ of tangerines will be demanded in Guatemala, and tons tons will be supplied by domestic suppliers. Therefore, Guatemala will export tons of tangerines. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade (Dollars) (Dollars) Consumer Surplus Producer Surplus and producer surplus by 5 So, the net effect of international trade on Guatemala's total surplus is a When Guatemala allows free trade, the country's consumer surplus by s of PRICE (Dollars per ton)

The following graph shows the same domestic demand and supply curves for tangerines in Guatemala. Suppose that the Guatemalan govemment changes its international trade policy to alloa free trade in tangerines. The horizontal black line (Pw) represents the world price of tangerines at $500 per ton. Assume that Guatemala's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. 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 consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. Domestic Demand Domestic Supply 620 590 Consumer Surplus 560 530 500 Producer Surplus 470 440 410 380 350 320 O 25 s0 75 100 125 150 175 200 225 250 QUANTITY (Tons of tangerines) when Guatemala allows free trade of tangerines, the price of a ton of tangerines in Guatemala will be $500. At this price. [ of tangerines will be demanded in Guatemala, and tons tons will be supplied by domestic suppliers. Therefore, Guatemala will export tons of tangerines. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade (Dollars) (Dollars) Consumer Surplus Producer Surplus and producer surplus by 5 So, the net effect of international trade on Guatemala's total surplus is a When Guatemala allows free trade, the country's consumer surplus by s of PRICE (Dollars per ton)

Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 1PA
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The following graph shows the same domestic demand and supply curves for tangerines in Guatemala. Suppose that the Guatemalan government changes its international trade policy to allow free trade in tangerines. The horizontal black line (Pw) represents the world price of tangerines at $500 per ton. Assume that Guatemala's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. Also assume that domestic suppliers will satisfy domestic demand s much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. o sha (? Domestic Supply 620 Domestic Demand 590 Consumer Surplus 560 530 Producer Surplus 500 P. 470 ш 440 410 380 350 320 100 125 150 175 QUANTITY (Tons of tangerines) 25 50 75 200 225 250 When Guatemala allows free trade of tangerines, the price of a ton of tangerines in Guatemala will be $500. At this price, tons of tangerines will be demanded in Guatemala, and |tons of tangerines. tons will be supplied by domestic suppliers. Therefore, Guatemala will export Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade (Dollars) (Dollars) Consumer Surplus Producer Surplus v by s J. So, the net effect of international trade on Guatemala's total surplus is av of When Guatemala allows free trade, the country's consumer surplus and producer surplus v by s PRICE (Dollars per ton)
Transcribed Image Text:The following graph shows the same domestic demand and supply curves for tangerines in Guatemala. Suppose that the Guatemalan government changes its international trade policy to allow free trade in tangerines. The horizontal black line (Pw) represents the world price of tangerines at $500 per ton. Assume that Guatemala's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. Also assume that domestic suppliers will satisfy domestic demand s much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. o sha (? Domestic Supply 620 Domestic Demand 590 Consumer Surplus 560 530 Producer Surplus 500 P. 470 ш 440 410 380 350 320 100 125 150 175 QUANTITY (Tons of tangerines) 25 50 75 200 225 250 When Guatemala allows free trade of tangerines, the price of a ton of tangerines in Guatemala will be $500. At this price, tons of tangerines will be demanded in Guatemala, and |tons of tangerines. tons will be supplied by domestic suppliers. Therefore, Guatemala will export Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade (Dollars) (Dollars) Consumer Surplus Producer Surplus v by s J. So, the net effect of international trade on Guatemala's total surplus is av of When Guatemala allows free trade, the country's consumer surplus and producer surplus v by s PRICE (Dollars per ton)
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