Suppose Jordan is open to free trade in the world market for maize. Since Jordan is small relative to the international market, the demand for and supply of maize in Jordan have no impact on the world price. The following graph shows the domestic market for maize in Jordan. The world price of a ton of maize is Pw = $800. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). ? PRICE (Dollars per ton) 1280 Domestic Demand Domestic Supply X 1220 1160 1100 1040 980 920 860 800 740 680 0 25 50 100 125 150 175 QUANTITY (Tons of maize) 75 Pw 200 225 250 CS PS Because Jordan participates in international trade in the market for maize, it will import tons of maize.

Suppose Jordan is open to free trade in the world market for maize. Since Jordan is small relative to the international market, the demand for and supply of maize in Jordan have no impact on the world price. The following graph shows the domestic market for maize in Jordan. The world price of a ton of maize is Pw = $800. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). ? PRICE (Dollars per ton) 1280 Domestic Demand Domestic Supply X 1220 1160 1100 1040 980 920 860 800 740 680 0 25 50 100 125 150 175 QUANTITY (Tons of maize) 75 Pw 200 225 250 CS PS Because Jordan participates in international trade in the market for maize, it will import tons of maize.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 8PA

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