The following graph shows the domestic demand and domestic supply curves for oranges in Bangladesh. Suppose Bangladesh's

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The Following Graph Shows The Domestic Demand And Domestic Supply Curves For Oranges In Bangladesh Suppose Bangladesh S 1 (87.96 KiB) Viewed 38 times

The following graph shows the domestic demand and domestic supply curves for oranges in Bangladesh. Suppose Bangladesh's government currently does not allow international trade in oranges. Use the black point (plus symbol) to indicate the equilibrium price of a tonne of oranges and the equilibrium quantity of oranges in Bangladesh in the absence 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 desired region. ? 1750 Domestic Demand Domestic Supply 1600 No Trade Equilibrium 1450 1300 A 1150 Consumer Surplus PRICE (Dollars per tonne) 1000 850 Producer Surplus 700 550 400 250 0 40 80 120 160 200 240 280 320 360 400
million. (Hint: Take note of the units on the axes of Based on the previous graph, total surplus in the absence of international trade is $ the graph.) The following graph shows the same domestic demand and supply curves for oranges in Bangladesh presented in the previous graph. Suppose that the Bangladeshi government changes its international trade policy to allow free trade in oranges. The horizontal black line (Pw) represents the world price of oranges at $700 per tonne. Assume that Bangladesh's entry into the world market for oranges has no effect on the world price and that 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. Use the green points (triangle symbols) to shade consumer surplus, and then use the purple points (diamond symbols) to shade producer surplus. (Note: Select and drag shaded regions from the palette to the graph. To resize the shaded regions, select one of the points and move it to the desired position.) 1750 Domestic Demand Domestic Supply 1600 Consumer Surplus 1450 1300 1150 X Producer Surplus PRICE (Dollars per tonne) 1000 850 700 World Price 550
550 400 250 0 400 40 80 120 160 200 240 280 320 360 QUANTITY (Thousands of tonnes of oranges) When Bangladesh allows free trade in oranges, the price of a tonne of oranges in Bangladesh will be $700. At this price, the quantity of oranges demanded by Bangladeshi consumers will be tonnes, and the quantity of oranges supplied by domestic producers will be tonnes. Therefore, Bangladesh will import tonnes of oranges. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. (Hint: Be sure to enter consumer and producer surplus in millions of dollars. Take note of the units on the graph.) With Free Trade Without Free Trade (Millions of dollars) (Millions of dollars) decreases Consumer Surplus Producer Surplus increases When Bangladesh allows free trade, the country's consumer surplus by $ million, and producer surplus by $ million. So, the net effect of international trade on Bangladesh's total surplus is a of $ million. Grade It Now Save & Continue