Consider the market for coffee in the small, isolated country of Krakozhia. Within Krakozhia, the domestic demand for coffee is:\[ Q^d = 500 - 2p \]and the domestic supply of coffee is:\[ Q^s = -150 + 3p \] ### Trade and Surplus Analysis#### (d) Open Trade ScenarioSuppose Krakozhia is open to trade and the world price is 150. Determine the following:- **Domestic Quantity Supplied**: The amount Krakozhia produces domestically at the world price.- **Domestic Quantity Demanded**: The amount Krakozhia consumes at the world price.- **Quantity Exported**: The excess of domestic quantity supplied over domestic quantity demanded, indicating the amount exported.#### (e) Graphing Domestic Supply and DemandCreate a graph with the following features:- **Axes**: Label the horizontal axis as "Quantity" and the vertical axis as "Price."- **Curves**: Plot the domestic supply and demand curves.- **World Price**: Draw a horizontal line at the price level of 150 to represent the world price.- **Intersections**: Identify and mark intercepts and relevant points where the supply and demand curves intersect.- **Surplus Areas**: Shade and label the areas representing consumer surplus (above the world price and below the demand curve) and producer surplus (below the world price and above the supply curve).#### (f) Surplus Calculations- **Consumer Surplus**: Calculate the area between the demand curve and the world price.- **Producer Surplus**: Compute the area between the world price and the supply curve.- **Total Surplus**: Add the consumer surplus to the producer surplus.### Welfare AnalysisIdentify who benefits:- **Made Better Off**: Analyze which group (consumers or producers) experiences an increase in surplus due to trade.- **Made Worse Off**: Determine which group experiences a decrease in surplus.This analysis is essential for understanding the economic implications of opening Krakozhia to international trade and the distribution of gains and losses among domestic consumers and producers.

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(d) Suppose Krakozhia is open to trade and the world price is 150. Determine the domestic quantity supplied, domestic quantity demanded, and the quantity exported. (e) Draw a graph showing the domestic supply and demand and world price from (d). Label all axes and curves and mark out intercepts and relevant values. Shade and label areas for the consumer and producer surplus. (f) Calculate the consumer, producer, and total surplus from (d). Who is made better off and who is made worse off by trade?

(d) Suppose Krakozhia is open to trade and the world price is 150. Determine the domestic quantity supplied, domestic quantity demanded, and the quantity exported. (e) Draw a graph showing the domestic supply and demand and world price from (d). Label all axes and curves and mark out intercepts and relevant values. Shade and label areas for the consumer and producer surplus. (f) Calculate the consumer, producer, and total surplus from (d). Who is made better off and who is made worse off by trade?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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