When an economy moves from a scenario without trade to free international trade, for industries in the export sector, consumer surplus _____, producer surplus _____, and the economy as a whole _____.

Question

Quizplus · Accepted Answer

When an economy opens up to free international trade, industries in the export sector typically experience an increase in demand for their goods on the global market. This leads to an increase in producer surplus as producers can sell more goods at higher prices. However, domestic consumer surplus in the export sector may fall because domestic prices increase as goods are now also being sold internationally. Despite this, the economy as a whole gains due to the overall increase in trade efficiency and the benefits of specialization.

When an Economy Moves from a Scenario Without Trade to Free