Consider the Sudanese market for tangerines. The following graph shows the domestic demand and domestic supply curves for tangerines in Sudan. Suppose Sudan's government currently does not allow international trade in tangerines. Use the black point (plus symbol) to indicate the equilibrium price of a ton of tangerines and the equilibrium quantity of tangerines in Sudan 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. 620 Domestic Demand Domestic Supply .+ 590 Equilibrium without Trade 560 530 500 Consumer Surplus 470 PRICE (Dollars per ton) 440 Producer Surplus 410 380 350 320 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Tons of tangerines) Based on the previous graph, total surplus in the absence of international trade is |$The following graph shows the same domestic demand and supply curves for tangerines in Sudan. Suppose that the Sudanese government changes its international trade policy to allow free trade in tangerines. The horizontal black line (Pw ) represents the world price of tangerines at $500 per ton. Assume that Sudan's entry into the world market for tangerines has no effect on the world price and there are no transportation or transaction costs associated with international trade in tangerines. 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 consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. 620 Domestic Demand Domestic Supply 590 Consumer Surplus 560 530 500 Producer Surplus PW 470 PRICE (Dollars per ton) 440 410 380 350 320 25 50 75 100 125 150 175 200 225 250 QUANTITY (Tons of tangerines) When Sudan allows free trade of tangerines, the price of a ton of tangerines in Sudan will be $500. At this price, tons of tangerines will be demanded in Sudan, and tons will be supplied by domestic suppliers. Therefore, Sudan will export tons of tangerines.Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade (Dollars) ( Dollars) Consumer Surplus Producer Surplus When Sudan allows free trade, the country's consumer surplus by $ and producer surplus by $ . So, the net effect of international trade on Sudan's total surplus is a of $Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade ( Dollars) (Dollars) Consumer Surplus increases Producer Surplus decreases When Sudan allows free trade, the country's consumer surplus by $ and producer surplus by $ . So, the net effect of international trade on Sudan's total surplus is a of $Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade (Dollars) (Dollars) Consumer Surplus increases Producer Surplus decreases When Sudan allows free trade, the country's consumer surplus by and producer surplus by $ So, the net effect of international trade on Sudan's total surplus is a of $Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. Without Free Trade With Free Trade ( Dollars) (Dollars) Consumer Surplus Producer Surplus loss gain When Sudan allows free trade, the country's consumer surplus by $ and producer surplus by So, the net effect of international trade on Sudan's total surplus is a of $
