Suppose New Zealand goes from being an isolated country to being an exporter of wool.As a result,
A) consumer surplus increases for consumers of wool in New Zealand.
B) producer surplus increases for producers of wool in New Zealand.
C) total surplus remains unchanged in the wool market in New Zealand.
D) it is reasonable to infer that other countries have a comparative advantage over New Zealand in wool production.

Question

Quizplus · Accepted Answer

If New Zealand becomes an exporter of wool, it means that it is producing more wool than it needs for domestic consumption. This would increase the supply of wool in the market, leading to a decrease in the price of wool. This would increase the producer surplus for wool producers in New Zealand, as they are getting a higher price for their wool than before. Consumer surplus might increase as well, as consumers might get a lower price for wool, but it is not necessarily the case. The total surplus in the wool market might change because of changes in the price and quantity of wool. It is not reasonable to infer that other countries have a comparative advantage over New Zealand in wool production based on the given information.

Suppose New Zealand Goes from Being an Isolated Country to Being