Scenario 9-1

For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q D = 210 − 2P, where Q D represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is Q S = -90 + 3P, where Q S represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard.
-Refer to Scenario 9-1. Suppose the world price of cardboard is $82.5. Then, relative to the no-trade situation, international trade in cardboard

Question

Scenario 9-1
​
For a small country called Boxland, the equation of the domestic demand curve for cardboard is Q D = 210 − 2P, where Q D represents the domestic quantity of cardboard demanded, in tons, and P represents the price of a ton of cardboard. For Boxland, the equation of the domestic supply curve for cardboard is Q S = -90 + 3P, where Q S represents the domestic quantity of cardboard supplied, in tons, and P again represents the price of a ton of cardboard.
-Refer to Scenario 9-1. Suppose the world price of cardboard is $82.5. Then, relative to the no-trade situation, international trade in cardboard

Quizplus · Accepted Answer

To determine the impact of international trade on Boxlandian consumers and producers, we first find the equilibrium price and quantity in the no-trade situation by setting the demand equation equal to the supply equation: $210 - 2P = -90 + 3P$. Solving for $P$ gives us the no-trade equilibrium price. Substituting the world price of $82.5 into the demand and supply equations gives us the quantities demanded and supplied at the world price. The difference in consumer and producer surplus from the no-trade situation to the trade situation gives us the net benefit or harm to consumers and producers. Calculating these differences with the given world price of $82.5 shows that consumers are harmed by $1,518.75 due to higher prices and reduced consumer surplus, while producers benefit by $2,784.38 due to access to a larger market and increased producer surplus.

Scenario 9-1 ​

Scenario 9-1