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bottom half    When Venezuela allows free trade of soybeans, the price of a ton of soybeans in Venezuela will be $350. At this price,   tons of soybeans will be demanded in Venezuela, and   tons will be supplied by domestic suppliers. Therefore, Venezuela will export   tons of soybeans.   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 Venezuela allows free trade, the country's consumer surplus  decrease or increase  by   , and producer surplus  decrease or increase   by   . So, the net effect of international trade on Venezuela's total surplus is a  loss or gain   of

bottom half    When Venezuela allows free trade of soybeans, the price of a ton of soybeans in Venezuela will be $350. At this price,   tons of soybeans will be demanded in Venezuela, and   tons will be supplied by domestic suppliers. Therefore, Venezuela will export   tons of soybeans.   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 Venezuela allows free trade, the country's consumer surplus  decrease or increase  by   , and producer surplus  decrease or increase   by   . So, the net effect of international trade on Venezuela's total surplus is a  loss or gain   of

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 8PA
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bottom half 
 
When Venezuela allows free trade of soybeans, the price of a ton of soybeans in Venezuela will be $350. At this price,
 
tons of soybeans will be demanded in Venezuela, and
 
tons will be supplied by domestic suppliers. Therefore, Venezuela will export
 
tons of soybeans.
 
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 Venezuela allows free trade, the country's consumer surplus 
decrease or increase  by
 
, and producer surplus  decrease or increase   by
 
. So, the net effect of international trade on Venezuela's total surplus is a  loss or gain   of
 
.
 
 
 
 
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 soybeans in Venezuela. Suppose that the Venezuelan government changes its international trade policy to allow free trade in soybeans. The horizontal black line (Pw) represents the world price of soybeans at $350 per ton. Assume that Venezuela's entry into the world market for soybeans has no effect on the world price and there are no transportation or transaction costs associated with international trade in soybeans. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. (? 450 Domestic Demand Domestic Supply 425 Consumer Surplus 400 375 350 Producer Surplus P.. 300 275 250 225 200 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of soybeans) When Venezuela allows free trade of soybeans, the price of a ton of soybeans in Venezuela will be $350. At this price, |tons of PRICE (Dollars per ton)
Transcribed Image Text: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 soybeans in Venezuela. Suppose that the Venezuelan government changes its international trade policy to allow free trade in soybeans. The horizontal black line (Pw) represents the world price of soybeans at $350 per ton. Assume that Venezuela's entry into the world market for soybeans has no effect on the world price and there are no transportation or transaction costs associated with international trade in soybeans. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. (? 450 Domestic Demand Domestic Supply 425 Consumer Surplus 400 375 350 Producer Surplus P.. 300 275 250 225 200 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of soybeans) When Venezuela allows free trade of soybeans, the price of a ton of soybeans in Venezuela will be $350. At this price, |tons of PRICE (Dollars per ton)
1. Welfare effects of free trade in an exporting country Consider the Venezuelan market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Venezuela. Suppose Venezuela's government currently does not allow international trade in soybeans. Use the black point (plus symbol) to indicate the equilibrium price of a ton of soybeans and the equilibrium quantity of soybeans in Venezuela 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. Domestic Demand Domestic Supply 450 425 Equilibrium without Trade 400 375 350 Consumer Surplus 325 300 Producer Surplus 275 250 225 200 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)
Transcribed Image Text:1. Welfare effects of free trade in an exporting country Consider the Venezuelan market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Venezuela. Suppose Venezuela's government currently does not allow international trade in soybeans. Use the black point (plus symbol) to indicate the equilibrium price of a ton of soybeans and the equilibrium quantity of soybeans in Venezuela 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. Domestic Demand Domestic Supply 450 425 Equilibrium without Trade 400 375 350 Consumer Surplus 325 300 Producer Surplus 275 250 225 200 10 20 30 40 50 60 70 80 90 100 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)
Expert Solution
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Producer surplus refer to the difference between the minimum acceptance price of the producer and actually received price for the goods and services.

Consumer surplus refer to the difference between the maximum willing to accept price and actually paid for the goods and services.

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