Discuss domestic suppliers will satisfy domestic demand

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Reference no: EM133918408

Problem

The graph shows the same domestic supply and demand curves for plums in China. Now, suppose that the Chinese government changes its stance on international trade, deciding to allow free trade in plums. The horizontal black line (PW) represents the world price of plums at $300 per ton. Assume that China's entry into the world market for plums has no effect on the world price and there are no transportation or transaction costs associated with international trade in plums. Also assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. Get the instant assignment help. Use the green triangle (triangle symbol) to shade in the area representing consumer surplus, and then use the purple triangle (diamond symbol) to shade in the area representing producer surplus.

Reference no: EM133918408

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