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    Equilibrium prices

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    1. The United States represents a small part of the world orange market.

    a. Draw a diagram depicting the equilibrium in the U.S. orange market without international trade. Identify the equilibrium price, equilibrium quantity, consumer surplus, and producer surplus.

    b. Suppose that the world orange price is below the U.S. price before trade, and that the U.S. orange market is now opened to trade. Identify the new equilibrium price, quantity consumed, quantity produced domestically, and quantity imported. Also show the change in the surplus of domestic consumers and producers. Has domestic total surplus increased or decreased?

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    Solution Preview

    The United States represents a small part of the world orange market.

    a. Draw a diagram depicting the equilibrium in the U.S. orange market without international trade. Identify the equilibrium price, equilibrium quantity, consumer surplus, and producer surplus.

    P US Orange market

    S
    Consumer
    Surplus

    P*

    Producer
    Surplus

    D

    Q* Q

    b. Suppose that the world orange price is below the U.S. price before trade, and that the U.S. orange market is now opened to trade. Identify the new ...

    Solution Summary

    The expert examines the equilibrium prices in the United States.

    $2.19

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