Explanation When the situation the domestic price is above the foreign price without trade, it means that the country has higher opportunity cost of producing the commodity and there is no comparative advantage in producing the commodity to the domestic country. The country will not produce the commodity when the country does not have the comparative advantage and it will import those commodities from the international market. This situation can be illustrated on the graph as follows:

The changes in consumer, producer and total surplus due to importing.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN: 9781337091992

Author: N. Gregory Mankiw

Publisher: Cengage Learning

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Protective Tariffs

A tariff is a kind of tax that is charged on exported and imported items. It means tariff is charged on both kinds of goods i.e., exported and imported. However, some goods may be exempted from this kind of tariff. Protective Tariffs refer to the charges…

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Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 9, Problem 3QR

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The changes in consumer, producer and total surplus due to importing.

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