Oranges are traded globally at 2 US dollar per kilogram. The equilibrium price in the perfect market for oranges of a small economy that does not trade with the rest of the world is equivalent to 1 US dollars. Demonstrate in a diagram and provide a short explanation, how opening to trade will affect: a. The price of light bulbs in the small economy, and the quantity supplied. b. The quantity demanded locally, and the quantity exported. c. What will happen to consumer surplus and to producer surplus?

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