The United States can produce wine domestically,but it can also import wine if the world price is lower than the domestic price.If the United States imports wine,consumer surplus will _____ by _____ the _____ in producer surplus;total surplus will _____.

Question

Quizplus · Accepted Answer

When the United States imports wine because the world price is lower than the domestic price, consumer surplus increases because consumers can buy wine at a lower price. This increase in consumer surplus is more than the decrease in producer surplus, as domestic producers may lose out due to cheaper imports. Despite the loss to producers, the overall total surplus (the sum of consumer and producer surplus) increases because the gains to consumers from lower prices outweigh the losses to producers.

The United States Can Produce Wine Domestically,but It Can Also