← វា Q Search this course ? Tutoring Center: Harper Colle X Content → C Mind Tap - Cengage Learning x b Answered: - >>> Sign out - X Elasticity of Demand Help ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5832655719808280021166203&elSBN 9781337914413&id=2125010357&snapshotId=4041364& ☆ >>> CENGAGE MINDTAP Aplia Homework: International Trade 品 + (?) No Trade Equilibrium 1300 Domestic Demand Domestic Supply 1200 1100 1000 900 800 700 600 500 400 ☑ 300 0 35 70 105 140 175 210 245 280 315 350 QUANTITY (Thousands of tons of oranges) PRICE (Dollars per ton) Δ C × A-Z Producer Surplus Consumer Surplus Based on the previous graph, total surplus in the absence of international trade is $87.5 Σ Q Dec 13 5:33 bongo ← វា Q Search this course ? Tutoring Center: Harper Colle X Content → C Mind Tap - Cengage Learning x b Answered: - >>> Sign out - X Elasticity of Demand Help ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5832655719808280021166203&elSBN 9781337914413&id=2125010357&snapshotId=4041364& ☆ >>> CENGAGE MINDTAP Aplia Homework: International Trade 2. Welfare effects of free trade in an importing country Consider the Zambian market for oranges. The following graph shows the domestic demand and domestic supply curves for oranges in Zambia. Suppose Zambia's government currently does not allow the international trade in oranges. Use the black point (plus symbol) to indicate the equilibrium price of a ton of oranges and the equilibrium quantity of oranges in Zambia in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium. Note: Select and drag a fill area point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region. 1300 Domestic Demand Domestic Supply 1200 1100 1000 900 ? No Trade Equilibrium A Consumer Surplus Σ m C × A-Z Dec 13 5:33 bongo

← វា Q Search this course ? Tutoring Center: Harper Colle X Content → C Mind Tap - Cengage Learning x b Answered: - >>> Sign out - X Elasticity of Demand Help ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5832655719808280021166203&elSBN 9781337914413&id=2125010357&snapshotId=4041364& ☆ >>> CENGAGE MINDTAP Aplia Homework: International Trade 品 + (?) No Trade Equilibrium 1300 Domestic Demand Domestic Supply 1200 1100 1000 900 800 700 600 500 400 ☑ 300 0 35 70 105 140 175 210 245 280 315 350 QUANTITY (Thousands of tons of oranges) PRICE (Dollars per ton) Δ C × A-Z Producer Surplus Consumer Surplus Based on the previous graph, total surplus in the absence of international trade is $87.5 Σ Q Dec 13 5:33 bongo ← វា Q Search this course ? Tutoring Center: Harper Colle X Content → C Mind Tap - Cengage Learning x b Answered: - >>> Sign out - X Elasticity of Demand Help ng.cengage.com/static/nb/ui/evo/index.html?deploymentId=5832655719808280021166203&elSBN 9781337914413&id=2125010357&snapshotId=4041364& ☆ >>> CENGAGE MINDTAP Aplia Homework: International Trade 2. Welfare effects of free trade in an importing country Consider the Zambian market for oranges. The following graph shows the domestic demand and domestic supply curves for oranges in Zambia. Suppose Zambia's government currently does not allow the international trade in oranges. Use the black point (plus symbol) to indicate the equilibrium price of a ton of oranges and the equilibrium quantity of oranges in Zambia in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium. Note: Select and drag a fill area point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region. 1300 Domestic Demand Domestic Supply 1200 1100 1000 900 ? No Trade Equilibrium A Consumer Surplus Σ m C × A-Z Dec 13 5:33 bongo

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Welfare effects of free trade in an importing country

Consider the Zambian market for oranges.

The following graph shows the domestic demand and domestic supply curves for oranges in Zambia. Suppose Zambia's government currently does not allow the international trade in oranges.

Use the black point (plus symbol) to indicate the equilibrium price of a ton of oranges and the equilibrium quantity of oranges in Zambia in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium.

Note: Select and drag a fill area point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region.

No Trade EquilibriumConsumer SurplusProducer Surplus035701051401752102452803153501300120011001000900800700600500400300PRICE (Dollars per ton)QUANTITY (Thousands of tons of oranges)Domestic DemandDomestic SupplyArea: 0

Based on the previous graph, total surplus in the absence of international trade is .

The following graph shows the same domestic demand and supply curves for oranges in Zambia. Suppose that the Zambian government changes its international trade policy to allow the free trade of oranges. The horizontal black line (PWPW) represents the world price of oranges at $700 per ton. Assume that Zambia's entry into the world market for oranges has no effect on the world price and there are no transportation or transaction costs associated with international trade in oranges. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.

Use the green point (triangle symbol) to shade consumer surplus, and then use the purple point (diamond symbol) to shade producer surplus.

Consumer SurplusProducer Surplus035701051401752102452803153501300120011001000900800700600500400300PRICE (Dollars per tons)QUANTITY (Thousands of tons of oranges)Domestic DemandDomestic SupplyPWArea: 0

When Zambia allows free trade of oranges, the price of a ton of oranges in Zambia will be $700. At this price, tons of oranges will be demanded in Zambia, and tons will be supplied by domestic suppliers. Therefore, Zambia will import tons of oranges.

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
(Millions of dollars)	(Millions of dollars)
Consumer Surplus
Producer Surplus

When Zambia allows free trade, the country's consumer surplus by , and producer surplus by . So, the net effect of international trade on Zambia's total surplus is a of .

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CENGAGE MINDTAP
Aplia Homework: International Trade
品
+
(?)
No Trade Equilibrium
1300 Domestic Demand
Domestic Supply
1200
1100
1000
900
800
700
600
500
400
☑
300
0 35 70 105 140 175 210 245 280 315 350
QUANTITY (Thousands of tons of oranges)
PRICE (Dollars per ton)
Δ
C
×
A-Z
Producer Surplus
Consumer Surplus
Based on the previous graph, total surplus in the absence of international trade is $87.5
Σ
Q
Dec 13 5:33
bongo

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