Exhibit 34-2

-Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is PW.If there is a policy change such that imports are prohibited,the price becomes P_N.U.S.producers are better off if imports are __________; specifically,their producers' surplus changes by area __________.

Question

Exhibit 34-2

-Refer to Exhibit 34-2.The U.S.demand and supply for a good are shown.Under a policy of free trade,the world price is PW.If there is a policy change such that imports are prohibited,the price becomes P_N.U.S.producers are better off if imports are __________; specifically,their producers' surplus changes by area __________.

Quizplus · Accepted Answer

U.S. producers are better off if imports are prohibited because they will be able to sell their product at a higher price, specifically at P_N. The change in their producer's surplus can be calculated as the area of the rectangle formed by P_N and the original supply curve (P_W) minus the triangle formed by P_W and P_N, which is BD. Therefore, the correct answer is D, prohibited.

Exhibit 34-2 -Refer to Exhibit 34-2.The U.S.demand and Supply for a Good