The nation of Textilia does not allow imports of clothing. In its equilibrium without trade, a T-shirt costs $20, and the equilibrium quantity is 3 million T-shirts. After reading Adam Smith’s The Wealth of Nations while on vacation, the president decides to open the Textilian market to international trade. The market prices of a T-shirt falls to the world price of $16. The number of T-shirts consumed in Textilia rises to 4 million, while the number of T-shirts produced declines to 1 million. Illustrate the situation just described in a graph. Your graph should show all the numbers. Calculate the change in consumer surplus, producer surplus, and total surplus that results from opening trade. (Hint: Recall that the area of a triangle is ½ x base x height.) 5. The nation of Textilia does not allow imports of clothing. In its equilibrium withouttrade, a T-shirt costs $20, and the equilibrium quantity is 3 million T-shirts. After readingAdam Smith's The Wealth of Nations while on vacation, the president decides to open theTextilian market to international trade. The market prices of a T-shirt falls to the worldprice of $16. The number of T-shirts consumed in Textilia rises to 4 million, while thenumber of T-shirts produced declines to 1 million.A. Illustrate the situation just described in a graph. Your graph should show all thenumbers.B. Calculate the change in consumer surplus, producer surplus, and total surplus thatresults from opening trade. (Hint: Recall that the area of a triangle is 1/2 x base xheight.)

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Answered: 5. The nation of Textilia does not…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The nation of Textilia does not allow imports of clothing. In its equilibrium without trade, a T-shirt costs $20, and the equilibrium quantity is 3 million T-shirts. After reading Adam Smith’s The Wealth of Nations while on vacation, the president decides to open the Textilian market to international trade. The market prices of a T-shirt falls to the world price of $16. The number of T-shirts consumed in Textilia rises to 4 million, while the number of T-shirts produced declines to 1 million.

Illustrate the situation just described in a graph. Your graph should show all the numbers.
Calculate the change in consumer surplus, producer surplus, and total surplus that results from opening trade. (Hint: Recall that the area of a triangle is ½ x base x height.)