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If Country A opens up their corn market to trade with the rest of the world...

If Country A opens up their corn market to trade with the rest of the world and the global price of corn is lower than the equilibrium price of corn in Country A, then Country A will ________ corn, which will ________ consumer surplus, ________ producer surplus, and ________ total surplus.

  • A. import; increase; decrease; increase
  • B. import; decrease; increase; increase
  • C. export; increase; decrease; increase
  • D. export; decrease; increase; increase
  • E. export; decrease; increase; decrease
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Answer #1

Ans: A )  import; increase; decrease; increase

Explanation:

If Country A opens up their corn market to trade with the rest of the world and the global price of corn is lower than the equilibrium price of corn in Country A, then Country A will import corn because it becomes cheaper as compared to domestic price. As a result consumer surplus will increase and producer surplus will decrease. In this process the total surplus will increase because the  gain in consumer surplus is more than the loss in producer surplus.

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