Domestic Demand Domestic Supply Consumer Surplus Pw Producer Surplus O 45 90 135 180 225 270 315 380 405 450 QUANTITY (Tons of lemons) ew Zealand allows free trade of lemons, the price of a ton of lemons in New Zealand will be $800. At this price, [ ] tons will be supplied by domestic suppliers. Therefore will be demanded in New Zealand, and | ]tons of lemons. be information from the previous tasks, complete the following table to analyze the welfare effect of allowing free tra Without Free Trade With Free Trade (Dollars) (Dollars)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
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Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus.
920
Domestic Demand
Domestic Supply
860
Consumer Surplus
800
Pw
740
680
Producer Surplus
620
580
500
440
380
320
45
90
135
180
225
270
315
360
405
450
QUANTITY (Tons of lemons)
When New Zealand allows free trade of lemons, the price of a ton of lemons in New Zealand will be $800. At this price, |
tons of
lemons will be demanded in New Zealand, and
|tons will be supplied by domestic suppliers. Therefore, New Zealand will export
tons of lemons.
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
When New Zealand allows free trade, the country's consumer surplus
by $
and producer surplus
by S
. So, the net effect of international trade on New Zealand's total surplus is a
of
PRICE (Dollars per ton)
Transcribed Image Text:Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. 920 Domestic Demand Domestic Supply 860 Consumer Surplus 800 Pw 740 680 Producer Surplus 620 580 500 440 380 320 45 90 135 180 225 270 315 360 405 450 QUANTITY (Tons of lemons) When New Zealand allows free trade of lemons, the price of a ton of lemons in New Zealand will be $800. At this price, | tons of lemons will be demanded in New Zealand, and |tons will be supplied by domestic suppliers. Therefore, New Zealand will export tons of lemons. 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 When New Zealand allows free trade, the country's consumer surplus by $ and producer surplus by S . So, the net effect of international trade on New Zealand's total surplus is a of PRICE (Dollars per ton)
Consider the New Zealand market for lemons.
The following graph shows the domestic demand and domestic supply curves for lemons in New Zealand. Suppose New Zealand's government
currently does not allow international trade in lemons.
Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in New Zealand in the
absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally,
use the purple triangle (diamond symbol) to shade the area representing producer surplus in equilibrium.
(?
920
Domestic Demand
Domestic Supply
860
Equilibrium without Trade
800
740
680
Consumer Surplus
820
580
Producer Surplus
500
440
380
320
45
90
135
180
225
270
315
380 405
450
QUANTITY (Tons of lemons)
Based on the previous graph, total surplus in the absence of international trade is S
The following graph shows the same domestic demand and supply curves for lemons in New Zealand. Suppose that the New Zealand government
changes its international trade policy to allow free trade in lemons. The horizontal black line (Pw) represents the world price of lemons at $800 per
ton. Assume that New Zealand's entry into the world market for lemons has no effect on the world price and there are no transportation or transaction
costs associated with international trade in lemons. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any
exporting or importing takes place.
PRICE (Dollars per ton)
Transcribed Image Text:Consider the New Zealand market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in New Zealand. Suppose New Zealand's government currently does not allow international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in New Zealand in the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade the area representing producer surplus in equilibrium. (? 920 Domestic Demand Domestic Supply 860 Equilibrium without Trade 800 740 680 Consumer Surplus 820 580 Producer Surplus 500 440 380 320 45 90 135 180 225 270 315 380 405 450 QUANTITY (Tons of lemons) Based on the previous graph, total surplus in the absence of international trade is S The following graph shows the same domestic demand and supply curves for lemons in New Zealand. Suppose that the New Zealand government changes its international trade policy to allow free trade in lemons. The horizontal black line (Pw) represents the world price of lemons at $800 per ton. Assume that New Zealand's entry into the world market for lemons has no effect on the world price and there are no transportation or transaction costs associated with international trade in lemons. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per ton)
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