PRICE 380 340 300 260 0 45 90 135 180 225 270 315 360 405 450 QUANTITY (Tons of melons) When Bangladesh adjusts its trade policy to allow free trade of melons, the price of one ton of melons in Bangladesh becomes $500. At this price, tons of melons will be demanded in Bangladesh, and tons will be supplied by domestic suppliers. Therefore, Bangladesh will export tons of melons. 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 Bangladesh allows free trade, the country's producer surplus by by $ ' and consumer surplus Therefore, the net effect of allowing international trade on Bangladesh's total surplus is a of 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 melons in Bangladesh. Now, suppose that the Bangladeshi government changes its stance on international trade, deciding to allow free trade in melons. The horizontal black line (Pw) represents the world price of melons at $500 per ton. Assume that Bangladesh's entry into the world market for melons has no effect on the world price and there are no transportation or transaction costs associated with international trade in melons. 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) 660 Domestic Demand Domestic Supply 620 580 540 500 460 420 380 340 Consumer Surplus Producer Surplus Pw ?
PRICE 380 340 300 260 0 45 90 135 180 225 270 315 360 405 450 QUANTITY (Tons of melons) When Bangladesh adjusts its trade policy to allow free trade of melons, the price of one ton of melons in Bangladesh becomes $500. At this price, tons of melons will be demanded in Bangladesh, and tons will be supplied by domestic suppliers. Therefore, Bangladesh will export tons of melons. 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 Bangladesh allows free trade, the country's producer surplus by by $ ' and consumer surplus Therefore, the net effect of allowing international trade on Bangladesh's total surplus is a of 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 melons in Bangladesh. Now, suppose that the Bangladeshi government changes its stance on international trade, deciding to allow free trade in melons. The horizontal black line (Pw) represents the world price of melons at $500 per ton. Assume that Bangladesh's entry into the world market for melons has no effect on the world price and there are no transportation or transaction costs associated with international trade in melons. 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) 660 Domestic Demand Domestic Supply 620 580 540 500 460 420 380 340 Consumer Surplus Producer Surplus Pw ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:PRICE
380
340
300
260
0
45 90 135 180 225 270 315 360 405 450
QUANTITY (Tons of melons)
When Bangladesh adjusts its trade policy to allow free trade of melons, the price of one ton of melons in Bangladesh becomes $500. At this price,
tons of melons will be demanded in Bangladesh, and
tons will be supplied by domestic suppliers.
Therefore, Bangladesh will export
tons of melons.
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 Bangladesh allows free trade, the country's producer surplus
by
by $
'
and consumer surplus
Therefore, the net effect of allowing international trade on Bangladesh's total surplus is a
of
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 melons in Bangladesh. Now, suppose that the Bangladeshi government
changes its stance on international trade, deciding to allow free trade in melons. The horizontal black line (Pw) represents the world price of melons at
$500 per ton. Assume that Bangladesh's entry into the world market for melons has no effect on the world price and there are no transportation or
transaction costs associated with international trade in melons. 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)
660
Domestic Demand
Domestic Supply
620
580
540
500
460
420
380
340
Consumer Surplus
Producer Surplus
Pw
?
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