A country opens up to trade and becomes an importer of some good. Consumer surplus ________, and producer surplus ________.

Question

Quizplus · Accepted Answer

When a country opens up to trade and becomes an importer of a good, the domestic price of the good typically falls to the world price, increasing consumer surplus as consumers can buy more at a lower price. However, producer surplus decreases because domestic producers receive a lower price for their goods and may sell less.

A Country Opens Up to Trade and Becomes an Importer