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Suppose Colombia is open to free trade in the world market for soybeans because of Colombia...

Suppose Colombia is open to free trade in the world market for soybeans because of Colombia small size the demand for and supply of soybeans in Colombia do not affect the world price the following graph shows the domestic soybeans market in Colombia the world price of soybeans is $400 per ton
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Answer #1

Consider the following fig shows the domestic market for “Soybeans” of “Colombia”.

So, here “D” be the demand for “S=Soybeans” and “S” be the supply of “S” and “E” be the autarkic equilibrium. So, at “E” the equilibrium quantity demanded and the quantity supplied is “Q1” and “P1 > $400” be the equilibrium price. Now, as the “Colombia” got open for trade, => the domestic price will be same as world price "Pw”. So, at the world price “Pw=400”, the quantity demanded increase to “Qd” and the quantity supplied decreases to “Qs”, => the level of import is given by, “Qd-Qs”.

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