The nation of Aquilonia has decided to end its policy of not trading with the rest of the world.When it ends its trade restrictions,it discovers that it is importing rice,exporting steel,and neither importing nor exporting TVs.We can conclude that producer surplus in Aquilonia is now
A)higher in the steel market,lower in the rice market,and unchanged in the TV market.
B)higher in the rice and steel markets,and unchanged in the TV market.
C)lower in the rice and TV markets,and higher in the steel market.
D)lower in the rice and steel markets,and the same in the TV market.

Question

Quizplus · Accepted Answer

When Aquilonia opens up to trade, it exports steel, indicating that it has a comparative advantage in steel production, which increases producer surplus in the steel market. It imports rice, suggesting that domestic producers face competition from cheaper or better-quality foreign rice, reducing producer surplus in the rice market. Since there is no trade in TVs, the producer surplus in the TV market remains unchanged.

The Nation of Aquilonia Has Decided to End Its Policy