When Canada exports a good,the ________ in Canada's consumer surplus is ________ the increase in Canada's producer surplus.

Question

Quizplus · Accepted Answer

When Canada exports a good, the domestic price of the good increases to match the world price, assuming the world price is higher. This leads to a decrease in consumer surplus because consumers have to pay more for the good. However, producers benefit from the higher price, leading to an increase in producer surplus. The decrease in consumer surplus is smaller than the increase in producer surplus because the total welfare (consumer surplus + producer surplus + government revenue if any) in the country increases with trade.

When Canada Exports a Good,the ________ in Canada's Consumer Surplus