If the price of torches in Estonia is $100 and the world price is $150, how would producer surplus change if Estonia opened to world trade?
A)it would rise by $50
B)it would rise by more than consumer surplus would fall
C)it wouldn't change but consumer surplus would rise
D)it would change by the same amount as consumer surplus

Question

Quizplus · Accepted Answer

When Estonia opens to world trade, producers can sell their torches at the higher world price of $150 instead of the domestic price of $100. This increases producer surplus because producers are receiving more for each torch than they were before. The increase in producer surplus could be more significant than the decrease in consumer surplus, as consumers now have to pay a higher price.

If the Price of Torches in Estonia Is $100 and the World