A country opens up to trade and becomes an importer of some good.Consumer surplus ________,producer surplus ________,and total surplus ________.

Question

Quizplus · Accepted Answer

When a country opens up to trade and becomes an importer of some good, the domestic price of the good will increase to the world price level. As a result, consumer surplus will decrease due to the higher price. However, producer surplus will increase due to the higher quantity sold at the higher price. Overall, total surplus will increase, but producer surplus will increase more than the decrease in consumer surplus, leading to a net increase in total surplus. Therefore, the correct answer is E) increases; decreases; increases.

A Country Opens Up to Trade and Becomes an Importer