3. The effects of exports a Aa The following graph shows the domestic market for

Question

3. The effects of exports a Aa The following graph shows the domestic market for raspberries in Perturbia. In the absence of trade, the domestic price of raspberries is $3 per pound and the equilibrium quantity is 3 million pounds per week. The world price of raspberries is $5 per pound und] Area Calculator Domestic Supply Domestic Demand QUANTITY (Millions of pounds per weekl Hlp Clear All Suppose Perturbia 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 export export import At the world price of $5 per pound, Perturbia will pounds of raspberries per week After trade, consumer surplus in Perturbia's raspberry market will producer surplus will by per week and by per week Free trade total surplus in Perturbia's raspberry market by per week

Explanation / Answer

Change in CS = Original CS - Final CS

1/2 x 3x 3 - 1/2 x 1x1 => 4

3. Producer surplus will increase by 8 pounds ( Loss in consumer surplus = gain in producer surplus i.e, 4 pounds) + (Area between 3 crosses i.e., 1/2 x 4 x 2 = 4) => 4+4 = 8

4.Free trade increases Total Surplus by 4 pounds i.e., area marked between 3 crosses.

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