(a): Explanation Here, in the case of the country, the domestic price was $20 and the quantity demanded and supplied was 3 million. Thus, the economy was in its initial equilibrium without trade. When free trade was allowed, the price fell to the world price of $16 and the quantity demanded increased to 4 million, whereas the quantity supplied decreased to just 1 million... Sub part (b): To determine Change in total surplus.

The impact of free trade on the country.

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN: 9781285165912

Author: N. Gregory Mankiw

Publisher: Cengage Learning

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Question

Chapter 9, Problem 5PA

(a):

To determine

The impact of free trade on the country.

Sub part (b):

To determine

Change in total surplus.

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