Based on the previous graph, total surplus in the absence of international trade isThe following graph shows the same domestic demand and supply curves for oranges in Bangladesh. Suppose that the Bangladeshi governmentchanges its international trade policy to allow the free trade of oranges. The horizontal black line (Pw) represents the world price of oranges at $700per ton. Assume that Bangladesh's entry into the world market for oranges has no effect on the world price and there are no transportation ortransaction costs associated with international trade in oranges. Also assume that domestic suppliers will satisfy domestic demand as much as possiblebefore any exporting or importing takes place.Lise the green point (triangle symbol) to shade consumer surplus, and then use the purple point (diamond symbol) to shade producer surplus.1580Domestic DemandDomestic Supply1470Consumer Surplus196012501140Producer Surplus10309208107005004803570105140175 210 245 280315350QUANTITY (Thousands of tons of oranges)When Bangladesh allows free trade of oranges, the price of a ton of oranges in Bangladesh will be $700. At this price,tons of orangeswill be demanded in Bangladesh, andtons will be supplied by domestic suppliers. Therefore, Bangladesh will importtonsof oranges.Lising the information from the previous tasks, complete the following table to analyze the welare effect or allowing free trade.Without Free TradeWith Free Trade(Millions of dollars) (Millions of dollars)Consumer SurplusProducer SurplusWhen Bangladesh allows free trade, the country's consumer surplusbyand producer surplusbySo, the net effect of international trade on Bangladesh's total surplus is aPRICE (Dollars per tors) Consider the Bangladeshi market for oranges.The following graph shows the domestic demand and domestic supply curves for oranges in Bangladesh. Suppose Bangladesh's government currentlydoes not allow the international trade in oranges.Lise the black point (plus symbol) to indicate the equilibrium price of a ton of oranges and the equilibrium quantity of oranges in Bangladesh in theabsence 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 desiredregion.1580Domestic DemandDomestic Supply1470No Trade Equilibrium1360A12501140Consumer Surplus1030920Producer Surplus8107005004803570105140175210245290 315350QUANTITY (Thousands of tons of oranges)Based on the previous graph, total surplus in the absence of international trade isThe following graph shows the same domestic demand and supply curves for oranges in Bangladesh. Suppose that the Bangladeshi governmentchanges its international trade policy to allow the free trade of oranges. The horizontal black line (Pw) represents the world price of oranges at $700per ton. Assume that Bangladesh's entry into the world market for oranges has no effect on the world price and there are no transportation ortransaction costs associated with international trade in oranges. Also assume that domestic suppliers will satisfy domestic demand as much as possiblebefore any exporting or importing takes place.PRICE (Dollars per ton)

Calculation of Total surplus Total surplus = Consumer Surplus + Producer Surplus Consumer Surplus =…

The following graph shows the same domestic demand and supply curves for oranges in Bangladesh. Suppose that the Bangladeshi government changes its international trade policy to allow the free trade of oranges. The horizontal black line (Pw) represents the world price of oranges at $700 per ton. Assume that Bangladesh'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. Uise the green point (triangle symbal) to shade consumer surplus, and then use the purple point (diamond symbol) to shade producer surplus. 1580 Domestic Demand Domestic Supply A 1470 Consumer Surplus

The following graph shows the same domestic demand and supply curves for oranges in Bangladesh. Suppose that the Bangladeshi government changes its international trade policy to allow the free trade of oranges. The horizontal black line (Pw) represents the world price of oranges at $700 per ton. Assume that Bangladesh'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. Uise the green point (triangle symbal) to shade consumer surplus, and then use the purple point (diamond symbol) to shade producer surplus. 1580 Domestic Demand Domestic Supply A 1470 Consumer Surplus

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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