Asked by Ryane Smalley on Jun 13, 2024
Verified
(Figure: The Market for Oranges in South Africa) Use Figure: The Market for Oranges in South Africa.In autarky,the price of oranges in South Africa is P1.When the economy is opened to trade,the price falls to PW and producer surplus will _____ to area _____.
A) fall;N + Q
B) fall;Q
C) rise;M + N + O + P
D) rise;M + N + O + P + Q
Producer Surplus
The excess amount that producers make from selling a product over their minimum acceptable price.
Autarky
An economic system characterized by self-sufficiency, where a region or country aims to produce all it needs without engaging in international trade.
Trade
The exchange of goods or services between parties, which can be within an economy or between economies, allowing for the specialization and efficiency gains.
- Inspect how trade influences the surplus of consumers and producers in a variety of market circumstances.
- Assess the repercussions of tariffs, blockades, and open markets on the behavior of international trade.
Verified Answer
SR
saurabh rathaurJun 19, 2024
Final Answer :
B
Explanation :
When the price falls from P1U1B1 to P1U1B0, producer surplus decreases from area M + N + O + P + Q to area M + N. Therefore, choice (B) is correct. Choices (A) and (C) are incorrect because they suggest that producer surplus will either fall or rise, which is not entirely accurate. Choice (D) is incorrect because it suggests that producer surplus will increase by both areas Q and M + N + O + P, which is not accurate.
Learning Objectives
- Inspect how trade influences the surplus of consumers and producers in a variety of market circumstances.
- Assess the repercussions of tariffs, blockades, and open markets on the behavior of international trade.