Question
The avocado market in the USA is a perfectly competitive market, most of the avocados grown domestically are from California. Assume ordinary demand and supply.
The avocado market in the USA is a perfectly competitive market, most of the avocados grown domestically are from California. Assume ordinary demand and supply.
A. Show the Autarky equilibrium, and identify the areas of consumer surplus and producer surplus.
B. Use a new diagram. To show a trade equilibrium assuming the world price is below the USA price. Identify the amount imported, and make clear any changes in consumer and producer surplus.
C. Mexico exports avocados. Show how the world price impacts the market (ordinary D and S) for Mexico. Identify how much they export and the impact on Mexico's consumer and producer surplus.
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