Question

 Consider the Venezuelan market for soybeans.

 The following graph shows the domestic demand and domestic supply curves for soybeans in Venezuela. Suppose Venezuela's 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 Venezuela 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.

 Based on the previous graph, total surplus in the absence of international trade is _______ 

 The following graph shows the same domestic demand and supply curves for soybeans In Venezuela. Suppose that the Venezuelan 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 Venezuela's 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.

Answer 1

	Without Free Trade ($)	With Free Trade ($)
Consumer Surplus	3125	2000
Producer Surplus	3125	5000