Figure: The Market for Oranges in South Africa (Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa.In autarky, the price of oranges in South Africa is P₁.When the economy is opened to trade, the price falls to PW and producer surplus will ________ to _.

Question

Figure: The Market for Oranges in South Africa  (Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa.In autarky, the price of oranges in South Africa is P₁.When the economy is opened to trade, the price falls to PW and producer surplus will ________ to _.

Quizplus · Accepted Answer

When the economy is opened to trade, the price of oranges falls to PW which is lower than P₁ in autarky. Therefore, the producer surplus decreases and some producers may exit the market. The new producer surplus will be the area below the PW line and above the supply curve, which is Q.

Figure: the Market for Oranges in South Africa (Figure