The following problem analyzes the Spanish market for limes. The graph below shows the domestic supply...
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The following problem analyzes the Spanish market for limes. The graph below shows the domestic supply and demand curves for limes in Spain. Assume that Spain's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Spain without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. (? Domestic Demand Domestic Supply 800 700 X 600 500 400 105 PRICE (Dollars per ton) 1100 1000 900 300 200 100 0 35 70 140 175 210 245 QUANTITY (Tons of limes) 280 315 350 Equilibrium without Trade Consumer Surplus Producer Surplus Based on the information from the previous graph, absent international trade total surplus is e The following graph shows the same domestic supply and demand curves for limes in Spain. Now, suppose that the Spanish government changes its stance on international trade, deciding to allow free trade in limes. The horizontal black line (Pw) represents the world price of limes at $800 per ton Assume that Spain's entry into the world market for limes has no effect on the world price and there are no transportation or transaction costs associated with international trade in limes. 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 in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus. PRICE (Dollars per ton) 1100 Domestic Demand 1000 900 800 700 600 500 400 300 200 100 0 35 70 Spain will export Domestic Supply P 105 140 175 210 245 280 315 QUANTITY (Tons of limes) W 350 Consumer Surplus al Producer Surplus (?) When Spain adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Spain becomes $800. At this price, tons of limes will be demanded in Spain, and tons of limes. tons will be supplied by domestic suppliers. Therefore, Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Consumer Surplus Producer Surplus With Free Trade (Dollars) Without Free Trade (Dollars) by $ Therefore, the net effect of allowing international trade on Spain's total surplus is a When Spain allows free trade, the country's producer surplus $ I and consumer surplus of $ decreases increases by The following problem analyzes the Spanish market for limes. The graph below shows the domestic supply and demand curves for limes in Spain. Assume that Spain's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Spain without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. (? Domestic Demand Domestic Supply 800 700 X 600 500 400 105 PRICE (Dollars per ton) 1100 1000 900 300 200 100 0 35 70 140 175 210 245 QUANTITY (Tons of limes) 280 315 350 Equilibrium without Trade Consumer Surplus Producer Surplus Based on the information from the previous graph, absent international trade total surplus is e The following problem analyzes the Spanish market for limes. The graph below shows the domestic supply and demand curves for limes in Spain. Assume that Spain's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Spain without international trade. Next, use the green triangle (triangle symbol) to shade in the area that represents consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade in the area that represents producer surplus in equilibrium. (? Domestic Demand Domestic Supply 800 700 X 600 500 400 105 PRICE (Dollars per ton) 1100 1000 900 300 200 100 0 35 70 140 175 210 245 QUANTITY (Tons of limes) 280 315 350 Equilibrium without Trade Consumer Surplus Producer Surplus Based on the information from the previous graph, absent international trade total surplus is e The following graph shows the same domestic supply and demand curves for limes in Spain. Now, suppose that the Spanish government changes its stance on international trade, deciding to allow free trade in limes. The horizontal black line (Pw) represents the world price of limes at $800 per ton Assume that Spain's entry into the world market for limes has no effect on the world price and there are no transportation or transaction costs associated with international trade in limes. 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 in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus. PRICE (Dollars per ton) 1100 Domestic Demand 1000 900 800 700 600 500 400 300 200 100 0 35 70 Spain will export Domestic Supply P 105 140 175 210 245 280 315 QUANTITY (Tons of limes) W 350 Consumer Surplus al Producer Surplus (?) When Spain adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Spain becomes $800. At this price, tons of limes will be demanded in Spain, and tons of limes. tons will be supplied by domestic suppliers. Therefore, The following graph shows the same domestic supply and demand curves for limes in Spain. Now, suppose that the Spanish government changes its stance on international trade, deciding to allow free trade in limes. The horizontal black line (Pw) represents the world price of limes at $800 per ton Assume that Spain's entry into the world market for limes has no effect on the world price and there are no transportation or transaction costs associated with international trade in limes. 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 in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus. PRICE (Dollars per ton) 1100 Domestic Demand 1000 900 800 700 600 500 400 300 200 100 0 35 70 Spain will export Domestic Supply P 105 140 175 210 245 280 315 QUANTITY (Tons of limes) W 350 Consumer Surplus al Producer Surplus (?) When Spain adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Spain becomes $800. At this price, tons of limes will be demanded in Spain, and tons of limes. tons will be supplied by domestic suppliers. Therefore, Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Consumer Surplus Producer Surplus With Free Trade (Dollars) Without Free Trade (Dollars) by $ Therefore, the net effect of allowing international trade on Spain's total surplus is a When Spain allows free trade, the country's producer surplus $ I and consumer surplus of $ decreases increases by Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Consumer Surplus Producer Surplus With Free Trade (Dollars) Without Free Trade (Dollars) by $ Therefore, the net effect of allowing international trade on Spain's total surplus is a When Spain allows free trade, the country's producer surplus $ I and consumer surplus of $ decreases increases by
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