GRAPHS NEED TO BE SHADY WITH THEIR ACCORDING TO SURPLUS ON BOTH GRAPHS

GRAPHS NEED TO BE SHADY WITH THEIR ACCORDING SURPLUS ON BOTH GRAPHS

GRAPHS NEED TO BE SHADY WITH THEIR ACCORDING SURPLUS ON BOTH GRAPHS

GRAPHS NEED TO BE SHADY WITH THEIR ACCORDING SURPLUS ON BOTH GRAPHS

GRAPHS NEED TO BE SHADY WITH THEIR ACCORDING SURPLUS ON BOTH GRAPHS

GRAPHS NEED TO BE SHADY WITH THEIR ACCORDING SURPLUS ON BOTH GRAPHS

The following problem analyzes the Spanish market for limes. The graph below shows the domestic supply and demand curves for limes in Spain. Assume that Spain's government does not currently permit international trade in limes. Use the black point (plus symbol) to denote the equilibrium price of one ton of limes and the equilibrium quantity of limes in Spain 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. The following graph shows the same domestic supply and demand curves for limes in Spain. Now, suppose that the Spanish government changes its stance on international trade, deciding to allow free trade in limes. The horizontal black line (PW) represents the world price of limes at $800 per ton. Assume that Spain's entry into the world market for limes has no effect on the world price and there are no transportation or transaction costs associated with international trade in limes. 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. When Spain adjusts its trade policy to allow free trade of limes, the price of one ton of limes in Spain becomes $800. At this price, tons of limes will be demanded in Spain, and tons will be supplied by domestic suppliers. Therefore, Spain will export tons of limes. 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 Spain allows free trade, the country's producer surplus by $, and consumer surplus by S . Therefore, the net effect of allowing international trade on Spain's total surplus is a of