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Question: consider the colombian market for soybeans the following graph shows...

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Consider the Colombian market for soybeans. The following graph shows the domestic demand and domestic supply curves for soybeans in Colombia. Suppose Colombias government currently does not allow international trade in soybeans. Use the black point (plus symbol) to indicate the equilibrium price of a ton of soybeans and the equilibrium quantity of soybeans in Colombia in the absence of international trade. Then, use the green triangle (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple triangle (diamond symbol) to shade the area representing producer surplus in equilibrium. 410Domestic Demand Domestic Supply 395 Equilibrium without Trade 380 365 350t Consumer Surplus 335 320 t Producer Surplus 305 290 275 260 0 20 40 60 100 120 140 160 180 200 QUANTITY (Tons of soybeans)

Based on the previous graph, total surplus in the absence of international trade is S The following graph shows the same domestic demand and supply curves for soybeans in Colombia. Suppose that the Colombian government changes its international trade policy to allow free trade in soybeans. The horizontal black line (Pw) represents the world price of soybeans at $350 per ton Assume that Colombias entry into the world market for soybeans has no effect on the world price and there are no transportation or transaction costs associated with international trade in soybeans. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Use the green triangle (triangle symbol) to shade consumer surplus, and then use the purple triangle (diamond symbol) to shade producer surplus. 410 Domestic Demand Domestic Supply 395 Consumer Surplus 380 365 350 Producer Surplus 335 320 305 290 275 260 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Tons of soybeans)

When Colombia allows free trade of soybeans, the price of a ton of soybeans in Colombia will be $350. At this price, tons of soybeans will be demanded in Colombia, and tons will be supplied by domestic suppliers. Therefore, Colombia will export tons of soybeans. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade With Free Trade (Dollars) Without Free Trade (Dollars) Consumer Surplus Producer Surplus When Colombia allows free trade, the countrys consumer surplus by S , and producer surplus So, the net effect of international trade on Colombias total surplus is aof s

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