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

Question

3. The effects of exports Aa 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 PRICE (Dollars per pound) Area Calculator Domestic Supply Domestic Demand QUANTITY (Millions of pounds per week] Help Clear AlIL 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 At the world price of $5 per pound, Perturbia wexport pounds of raspberries per week. export import 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

1)

At world price of $5, Pertubia will export 5-1 = 4 pounds of raspberries

2)

After trade, consumer surplus will fall by 4.5-0.5 = 4 units and producer surplus will increase by 12.5-4.5 = 8 units

3)

Free trade increases total surplus by (12.5+0.5)-(4.5+4.5) = 4 units.

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