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3 1. Welfare effects of free trade in an exporting country Consider the Honduran market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Honduras, Suppose Honduras'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 Honduras 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. 450 estic Demand Domestic Supply 05 Equilibrium without Trade 400 375 350 Consumer Surplus 306 e Q A O A
5 42 47 Ⓡ 8 PRICE (Dotas per to SUGA&RERER Domestic Demand 20 Domestic Supply Q II @ 444 Equiorum without Trade Consumer Surplus D 10 QUANTITY (Tons of soybeans) Based on the previous graph, total surplus in the absence of international trade i Producer Surplus 7:03 PM 5/28/2022 A-Z
28 A Homework (Ch 09) The following graph shows the same domestic demand and supply curves for soybeans in Honduras. Suppose that the Honduran 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 Honduras's entry into the world market for soybeans has no effect on the world price and there are no transportation or transaction costs exporting or importing takes place. associated with international trade in soybeans. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus ? 00 Ou Demand Domes Supply 435 400 a A B 0 Producer Surplus Q Search this course ох 7:00 PM 5/28/2002 D O 2 A-Z *
a PRICE (Dots per ton al FO 20 e Domestic Supply www. QUANTITY (Ts of soybeans) ❤ 116 6 Consumer Surplus Producer Surplus C 3 ID Ⓡ 4 20 nda 0 x 7:03 PM 5/28/2022
Homework (Ch 09) tons of When Honduras allows free trade of soybeans, the price of a ton of soybeans in Honduras will be $350. At this price, soybeans will be demanded in Honduras, and tons will be supplied by domestic suppliers. Therefore, Honduras will export tons of soybeans 3 Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade (Dollars) With Free Trade (Dollars) Consumer Surplus ? Producer Surplus B When Honduras allows free trade, the country's consumer surplus and producer surplus of by S So, the net effect of international trade on Honduras's total surplus is a Grade It Now P 77 S @ 9 O Save & Continue Continue without saving Ох 7:04 PM $28.0022 A-Z - B