1. Welfare effects of free trade in an exporting country The following problem analyzes the Sudanese market for melons. The graph below shows the domestic supply and demand curves for melons in Sudan. Assume that Sudan's government does not currently permit international trade in melons. Use the black point (plus symbol) to denote the equilibrium price of one ton of melons and the equilibrium quantity of melons in Sudan 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. 660 Domestic Demand Domestic Supply 620 Equilibrium without Trade 580 540 500 Consumer Surplus 460 PRICE (Dollars per ton) 420 Producer Surplus 380 340 300 260 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Tons of melons) Based on the information from the previous graph, absent international trade total surplus is | $The following graph shows the same domestic supply and demand curves for melons in Sudan. Now, suppose that the Sudanese government changes its stance on international trade, deciding to allow free trade in melons. The horizontal black line (Pw) represents the world price of melons at $500 per ton. Assume that Sudan's entry into the world market for melons has no effect on the world price and there are no transportation or transaction costs associated with international trade in melons. 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. 660 - Domestic Demand Domestic Supply 620 580 Consumer Surplus 540 $0 500 Producer Surplus 460 420 PRICE (Dollars per ton) 380 340 300 260 1OOllOOlIOr O 30 60 90 120 150 180 210 240 270 300 QUANTITY (Tons of melons) When Sudan adjusts its trade policy to allow free trade of melons, the price of one ton of melons in Sudan becomes $500. At this price, tons of melons will be demanded in Sudan, and |:]tons will be supplied by domestic suppliers. Therefore, Sudan will export tons of melons. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade Without Free Trade (Dollars) (Dollars) Consumer Surplus Producer Surplus When Sudan allows free trade, the country's producer surplus V by , and consumer surplus V by . Therefore, the net effect of allowing international trade on Sudan's total surplus is a V of