The United States can produce whiskey domestically, but it can also export whiskey if the world price is higher than the domestic price. If the United States exports whiskey, consumer surplus will _____, producer surplus will _____, and total surplus will _____.

Question

Quizplus · Accepted Answer

If the United States exports whiskey, domestic supply decreases and domestic price increases. Therefore, domestic consumer surplus decreases. However, domestic producers benefit from the higher prices and producer surplus increases. Overall, total surplus will decrease because the decrease in consumer surplus will be larger than the increase in producer surplus.

The United States Can Produce Whiskey Domestically, but It Can