Question: and 1. Welfare effects of free trade in an exporting country Consider the Zambian market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Zambia. Suppose Zambia’s government currently does not allow international trade in soybeans. Use the black point (plus symbol) to indicate the equilibrium price of aShow transcribed image textGreetings student , Thanks for question. If you face any problem understanding my answer,please use the comments secti…View the full answerTranscribed image text: and 1. Welfare effects of free trade in an exporting country Consider the Zambian market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Zambia. Suppose Zambia’s government currently does not allow international trade in soybeans. Use the black point (plus symbol) to indicate the equilibrium price of a ton of soybeans and the equilibrium quantity of soybeans in Zambia the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade the area representing producer surplus in equilibrium. 380 PRICE (Dollars perton) 365 350 335 320 305 210 275 200 245 236 Domestic Demand 0 26 50 Domestic Supply 75 100 125 150 175 200 225 200 QUANTITY (Tons of soybeans) 14. Equilibrium without Trade Consumer Surplus Producer Surplus Based on the previous graph, total surplus in the absence of international trade is S The following graph shows the same domestic demand and supply curves for soybeans in Zambia. Suppose that the Zambian government changes its international trade policy to allow free trade in soybeans. The horizontal black line (Pw) represents the world price of soybeans at $350 per ton. Assume that Zambia’s entry into the world market for soybeans has no effect on the world price and there are no transportation or transaction costs associated with international trade in soybeans. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. PRICE (Dolars perton) 380 Domestic Demand 300 325 306 210 275 250 245 330 • 50 Domestic Supply 75 100 125 150 175 200 225 250 QUANTITY (Tons of soybears) 시지 Consumer Surplus Producer Surplus When Zambia allows free trade of soybeans, the price of a ton of soybeans in Zambia will be $350. At this price, soybeans will be demanded in Zambia, and tons will be supplied by domestic suppliers. Therefore, Zambia will export tons of tons of soybeans. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. With Free Trade (Dollars) Consumer Surplus Producer Surplus Without Free Trade (Dollars) Vihen Zambia allows free trade, the country’s consumer surplus by S So, the net effect of international trade on Zambia’s total surplus is a of S and producer surplus by
