Figure 9-14.On the diagram below,Q represents the quantity of crude oil and P represents the price of crude oil.
-Refer to Figure 9-14.A result of this country allowing international trade in crude oil is as follows:
A)The well-being of domestic crude-oil producers is now higher in that they now sell more crude oil at a higher price per barrel.
B)The effect on the well-being of domestic crude-oil consumers is unclear in that they now buy more crude oil,but at a higher price per barrel.
C)The effect on the well-being of the country is unclear in that domestic producer surplus increases,while the effect on domestic consumer surplus is unclear.
D)All of the above are correct.

Question

Figure 9-14.On the diagram below,Q represents the quantity of crude oil and P represents the price of crude oil. 
-Refer to Figure 9-14.A result of this country allowing international trade in crude oil is as follows:
A)The well-being of domestic crude-oil producers is now higher in that they now sell more crude oil at a higher price per barrel. 
B)The effect on the well-being of domestic crude-oil consumers is unclear in that they now buy more crude oil,but at a higher price per barrel. 
C)The effect on the well-being of the country is unclear in that domestic producer surplus increases,while the effect on domestic consumer surplus is unclear. 
D)All of the above are correct.

Quizplus · Accepted Answer

Allowing international trade in crude oil causes an increase in the price of crude oil, which is beneficial for domestic crude-oil producers as they can now sell more crude oil at a higher price per barrel. This results in an increase in their well-being. The effect on domestic crude-oil consumers may be negative as they now have to pay a higher price for crude oil, but this is uncertain. The effect on the well-being of the country as a whole is also unclear as domestic producer surplus increases, but the effect on domestic consumer surplus is ambiguous.