The following graph shows the domestic market for strawberries in Freedonia. In
ID: 1127218 • Letter: T
Question
The following graph shows the domestic market for strawberries in Freedonia. In the absence of trade, the domestic price of strawberries is $5 per pound and the equilibrium quantity is 4 million pounds per week. The world price of strawberries is $6 per pound. PRICE (Dollars per pound) Area Calculator Domestic Supply Domestic QUANTITYMillions of pounds per week) Help Clear All Suppose Freedonia opens itself up to international trade. You can use the red quadrilateral (cross symbols) labeled "Area Calculator" to determine changes in consumer and producer surplus that result from free trade. You will not be graded on where you place the red quadrilateral on the graph. At the world price of $6 per pound, Freedonia will pounds of strawberries per week. After trade, consumer surplus in Freedonia's strawberry market will producer surplus will by per week and by per week. Free trade total surplus in Freedonia's strawberry market by per week. QNA 3.16 © 2004-2016 Aplia, All rights reserved Graphs Tool 1. SS © 2002, 2013 Cengage Learning, All rights reserved. © 2013 Cengage Learning except as noted. All rights reserved. Grade It Now Save & ContinueExplanation / Answer
At the world price of $6, demand will be 3 m pounds of strawberries per week and supply will be 5 m pounds of strawberries per week .
Consumer surplus is the area above demand curve
Consumer surplus before trade = 1/2 x b x h
= 1/2 x (4-0) (8-5)= 1/2 x4x3= 1/2x 12=6
Producer surplus is the area above supply curve
Producer surplus before trade = 1/2 x b x h
= 1/2 (4-0) (5-1)
= 1/2 x 4 x 4= 1/2 x 16= 8
Total surplus = Consumer surplus + Producer surplus = 6 + 8 = 14 m per week
Consumer surplus after trade = 1/2 x b x h
= 1/2 x (3-0) (8-6)= 1/2 x3x2= 1/2x 6=3 m per week
Producer surplus after trade = 1/2 x b x h
= 1/2 (5-0) (6-1)
= 1/2 x 5 x 5= 1/2 x 25= 12.5 m per week
Total surplus after trade = consumer surplus + producer surplus after trade = 3 + 12.5 m per week= 15.5 m per week
Increase in total surplus after trade = 15.5 -14= 1.5 m per week
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.