Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade...

Suppose the world price of cardboard is $45. Then, relative to the no-trade situation, international trade in cardboard produces which of the following results for Boxland?

Expert Solution

The world price of cardboard is $45 which is less than the domestic equilibrium price .

Consumer surplus is the triangle area above the price and below the demand curve , as the price reduces i.e $45 , CS increases.

And Producer surplus is the triangle area above the supply curve and below the price , so as the price reduces , PS decreases.

So, international trade in cardboard increases consumer surplus , decreases producer surplus and increases total surplus.

Rahul Sunny answered 2 years ago

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