5. Welfare effects of free trade in an exporting country Consider the Bolivian m

Question

5. Welfare effects of free trade in an exporting country Consider the Bolivian market for lemons The following graph shows the domestic demand and domestic supply curves for lemons in Bolivia. Suppose Bolivia's government currently does not allow the international trade in lemons Use the black point (plus symbol) to indicate the equilibrium price of a ton of lemons and the equilibrium quantity of lemons in Bolivia in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium 960Domestic Demand 880 800 Domestic Supply No Trade Equilibriunm 720 640 Consumer Surplus 560 w 480 400 320 240 160 Producer Surplus 0 15 30 45 60 75 90 105 120 135 150 QUANTITY (Thousands of tons of lemons) Based on the previous graph, total surplus in the absence of international trade is $ million.

Explanation / Answer

in the previous graph total surplus is area under demand curve 0.5*960*150=72000

when lemon price in Bolivia will be 800, Demand=30, supply=120. so export= 90

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