This graph demonstrates the domestic demand and supply for a good,as well as a tariff and the world price for that good. According to the graph shown,if the economy were to open to free trade,it would become:

Question

This graph demonstrates the domestic demand and supply for a good,as well as a tariff and the world price for that good.  According to the graph shown,if the economy were to open to free trade,it would become:

Quizplus · Accepted Answer

The graph shows that the world price is lower than the domestic equilibrium price, indicating that the country is currently producing the good at a higher cost than the world price. If the country were to open to free trade, it would import the good from other countries at the lower world price, making it a net-importer. This would lead to a decrease in the domestic price, an increase in consumer surplus, and a decrease in producer surplus. However, overall market surplus would increase as a result of the lower price and increased consumption.

This Graph Demonstrates the Domestic Demand and Supply for a Good,as