If an import-competing firm is the only domestic producer of a good,then a transition from autarky to free trade will ________ domestic price,________ producer surplus,________ consumer surplus,and ________ overall domestic national welfare.
A) decrease; decrease; increase; increase
B) increase; increase; increase; increase
C) decrease; decrease; decrease; decrease
D) increase; increase; decrease; decrease
E) increase; increase; decrease; increase

Question

Quizplus · Accepted Answer

When transitioning from autarky to free trade, the domestic price decreases due to competition from imports, producer surplus decreases as the domestic firm faces competition, consumer surplus increases due to lower prices, and overall domestic national welfare increases due to gains from trade.

If an Import-Competing Firm Is the Only Domestic Producer of a Good,then