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The following graph shows the domestic demand and domestic supply curves for tangerines in Panama. Suppose Panama's government currently does not allow international trade in tangerines. Use the black point (plus symbol) to indicate the equilibrium price of a ton of tangerines and the equilibrium quantity of tangerines in Panama 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. PRICE (Dollars per ton) 660 620 580 540 460 420 380 340 300 260 0 Domestic Demand 30 Domestic Supply 60 90 120 150 180 210 240 270 300 QUANTITY (Tons of tangerines) jalal Equilibrium without Trade Consumer Surplus Producer Surplus 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 tangerines in Panama. Suppose that the Panamanian government changes its international trade policy to allow free trade in tangerines. The horizontal black line (Pw) represents the world price of tangerines at $500 per ton. Assume that Panama's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.

The following graph shows the domestic demand and domestic supply curves for tangerines in Panama. Suppose Panama's government currently does not allow international trade in tangerines. Use the black point (plus symbol) to indicate the equilibrium price of a ton of tangerines and the equilibrium quantity of tangerines in Panama 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. PRICE (Dollars per ton) 660 620 580 540 460 420 380 340 300 260 0 Domestic Demand 30 Domestic Supply 60 90 120 150 180 210 240 270 300 QUANTITY (Tons of tangerines) jalal Equilibrium without Trade Consumer Surplus Producer Surplus 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 tangerines in Panama. Suppose that the Panamanian government changes its international trade policy to allow free trade in tangerines. The horizontal black line (Pw) represents the world price of tangerines at $500 per ton. Assume that Panama's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Analyzing Consumer and Producer Surplus with Free Trade** ### Graph Explanation The graph presented illustrates Panama's domestic market for tangerines: - **Axes**: The vertical axis represents the price in dollars per ton of tangerines, ranging from $260 to $660. The horizontal axis depicts the quantity of tangerines in tons, ranging from 0 to 300. - **Lines**: - **Domestic Demand (Blue Line)**: Slopes downward from the top left to the bottom right, indicating that as the price decreases, the quantity demanded increases. - **Domestic Supply (Orange Line)**: Slopes upward from the bottom left to the top right, indicating that as the price increases, the quantity supplied also increases. - **World Price (PW - Black Horizontal Line)**: Set at $500 per ton, suggesting the price at which Panama engages in free trade for tangerines. ### Surplus Areas - **Consumer Surplus (Green Triangle)**: The area above the price line (PW) and below the demand curve represents the benefit to consumers who purchase tangerines at a lower price than they are willing to pay. - **Producer Surplus (Purple Diamond)**: The area below the price line (PW) and above the supply curve represents the benefit to producers who sell tangerines at a higher price than their minimum acceptable price. ### Text Analysis - **Scenario Analysis**: - With a free trade scenario, the price of tangerines is set at $500 per ton. - At this price: - There is a placeholder indicating the specific number of tons demanded in Panama. - Another placeholder indicates the number of tons supplied by domestic sources. - The difference in these placeholders shows how many tons Panama will export. - **Welfare Changes**: - A table format is provided to compare consumer and producer surplus in two scenarios: without free trade and with free trade. - Statements guide filling in the effects: - The consumer surplus changes by a certain amount in dollars. - The producer surplus changes by a certain amount in dollars. - The net effect on Panama’s total surplus is evaluated by comparing these changes. This content provides a comprehensive understanding of how free trade influences consumer and producer surplus in Panama's tangerine market, reflected through the graph and corresponding analysis.
Transcribed Image Text:**Analyzing Consumer and Producer Surplus with Free Trade** ### Graph Explanation The graph presented illustrates Panama's domestic market for tangerines: - **Axes**: The vertical axis represents the price in dollars per ton of tangerines, ranging from $260 to $660. The horizontal axis depicts the quantity of tangerines in tons, ranging from 0 to 300. - **Lines**: - **Domestic Demand (Blue Line)**: Slopes downward from the top left to the bottom right, indicating that as the price decreases, the quantity demanded increases. - **Domestic Supply (Orange Line)**: Slopes upward from the bottom left to the top right, indicating that as the price increases, the quantity supplied also increases. - **World Price (PW - Black Horizontal Line)**: Set at $500 per ton, suggesting the price at which Panama engages in free trade for tangerines. ### Surplus Areas - **Consumer Surplus (Green Triangle)**: The area above the price line (PW) and below the demand curve represents the benefit to consumers who purchase tangerines at a lower price than they are willing to pay. - **Producer Surplus (Purple Diamond)**: The area below the price line (PW) and above the supply curve represents the benefit to producers who sell tangerines at a higher price than their minimum acceptable price. ### Text Analysis - **Scenario Analysis**: - With a free trade scenario, the price of tangerines is set at $500 per ton. - At this price: - There is a placeholder indicating the specific number of tons demanded in Panama. - Another placeholder indicates the number of tons supplied by domestic sources. - The difference in these placeholders shows how many tons Panama will export. - **Welfare Changes**: - A table format is provided to compare consumer and producer surplus in two scenarios: without free trade and with free trade. - Statements guide filling in the effects: - The consumer surplus changes by a certain amount in dollars. - The producer surplus changes by a certain amount in dollars. - The net effect on Panama’s total surplus is evaluated by comparing these changes. This content provides a comprehensive understanding of how free trade influences consumer and producer surplus in Panama's tangerine market, reflected through the graph and corresponding analysis.
## Homework (Ch 09) The following graph shows the domestic demand and domestic supply curves for tangerines in Panama. Suppose Panama's government currently does not allow international trade in tangerines. ### Instructions: - **Use the black point (plus symbol):** Indicate the equilibrium price of a ton of tangerines and the equilibrium quantity of tangerines in Panama in the absence of international trade. - **Green triangle (triangle symbol):** Shade the area representing consumer surplus in equilibrium. - **Purple triangle (diamond symbol):** Shade the area representing producer surplus in equilibrium. ### Graph Details: - **Axes:** - **Y-axis (Price: Dollars per ton):** Ranges from $260 to $660 with intervals of $40. - **X-axis (Quantity: Tons of tangerines):** Ranges from 0 to 300 with intervals of 30. - **Curves:** - **Domestic Demand (blue line):** Downward sloping. - **Domestic Supply (orange line):** Upward sloping. - **Key Symbols:** - **Equilibrium without Trade (black plus symbol)** - **Consumer Surplus (green triangle)** - **Producer Surplus (purple diamond)** ### Additional Information: Based on the graph, total surplus in the absence of international trade is _______ (fill in the blank with the appropriate value). ### Further Instructions: Assume the Panamanian government changes its international trade policy to allow free trade in tangerines. - **Horizontal black line (\(P_W\)):** Represents the world price of tangerines at $500 per ton. - Assume Panama's entry into the world market for tangerines has no effect on the world price, and there are no transportation or transaction costs associated with international trade in tangerines. - Assume domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
Transcribed Image Text:## Homework (Ch 09) The following graph shows the domestic demand and domestic supply curves for tangerines in Panama. Suppose Panama's government currently does not allow international trade in tangerines. ### Instructions: - **Use the black point (plus symbol):** Indicate the equilibrium price of a ton of tangerines and the equilibrium quantity of tangerines in Panama in the absence of international trade. - **Green triangle (triangle symbol):** Shade the area representing consumer surplus in equilibrium. - **Purple triangle (diamond symbol):** Shade the area representing producer surplus in equilibrium. ### Graph Details: - **Axes:** - **Y-axis (Price: Dollars per ton):** Ranges from $260 to $660 with intervals of $40. - **X-axis (Quantity: Tons of tangerines):** Ranges from 0 to 300 with intervals of 30. - **Curves:** - **Domestic Demand (blue line):** Downward sloping. - **Domestic Supply (orange line):** Upward sloping. - **Key Symbols:** - **Equilibrium without Trade (black plus symbol)** - **Consumer Surplus (green triangle)** - **Producer Surplus (purple diamond)** ### Additional Information: Based on the graph, total surplus in the absence of international trade is _______ (fill in the blank with the appropriate value). ### Further Instructions: Assume the Panamanian government changes its international trade policy to allow free trade in tangerines. - **Horizontal black line (\(P_W\)):** Represents the world price of tangerines at $500 per ton. - Assume Panama's entry into the world market for tangerines has no effect on the world price, and there are no transportation or transaction costs associated with international trade in tangerines. - Assume domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
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