Include correctly labeled diagrams, if useful or required, in explaining your answers. Show work. In the small
Question:
Include correctly labeled diagrams, if useful or required, in explaining your answers. Show work.
In the small country of AgroIsland, the equilibrium price of wheat is $10 per bushel Wheat is produced in a competitive industry The world market price of wheat is $20 per bushel
(a) Assume that AgroIsland currently does not engage in international trade Draw a correctly labeled graph illustrate the market for wheat
The equilibrium price labeled $10
The equilibrium quantity labeled Q
The domestic producer surplus shaded completely and labeled PS
(b) On the graph show
The world price of a bushel of wheat labeled $20
The quantity of wheat supplied by domestic producers labeled QP
The domestic consumer surplus after trade shaded completely and labeled CS
(c) How does each of the following change if Agro Island engages in international trade in the wheat market
The domestic consumer surplus
The domestic producer surplusrn
Expert Answer:
International Finance Theory and Policy
ISBN: 978-0133423648
10th edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
