4 . Welfare effects of free trade in an importing country

Consider the Bolivian market for lemons.

The following graph shows the domestic demand and domestic supply curves for lemons in Bolivia. Suppose Bolivia's government currently does not allow international trade in lemons.

Use the black point (plus symbol) to indicate the equilibrium price of a tonne of lemons and the equilibrium quantity of lemons in Bolivia 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.

1150 Domestic Demand Domestic Supply 1100 No Trade Equilibrium 1050 A 1000 Consumer Surplus 950 900 PRICE (Dollars per tonne) 850 Producer Surplus 800 750 700 650 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Thousands of tonnes of lemons)PRICE (Dollars per tonne) 1150 1100 1050 1000 950 900 850 800 750 700 650 0 Domestic Demand 40 80 120 160 200 240 280 320 QUANTITY (Thousands of tonnes of lemons) Domestic Supply 360 400 h Consumer Surplus 85 Producer Surplus ? 10 CO Domestic Demand Domestic Supply Scratch Area CO 6 5 PRICE (Dollars per kilogram) 2 1 0 0 1 2 3 4 5 6 7 8 9 10 QUANTITY (Millions of kilograms)PRICECOST [Dollars per tonne) ?000 6500 Egg 4500 E 3500 E 2500 2000 1500 1000 2 3 4 5 6 T 8 9 QUANTITY {Millions of tonnes) 10 11 12 + Price with Tariff A Tariff Revenue Change in P5 DWL