When a country abandons a no-trade policy,adopts a free-trade policy,and becomes an exporter of a particular good,
A)producer surplus increases and total surplus increases in the market for that good.
B)producer surplus increases and total surplus decreases in the market for that good.
C)producer surplus decreases and total surplus increases in the market for that good.
D)producer surplus decreases and total surplus decreases in the market for that good.

Question

Quizplus · Accepted Answer

When a country adopts a free-trade policy and becomes an exporter of a particular good, it can produce and sell more of that good at a higher price on the world market. This leads to an increase in producer surplus (the difference between the price received by producers and their cost of production) and, since consumers can purchase the good more cheaply, an increase in total surplus (the sum of consumer and producer surplus) in the market for that good. Therefore, choice A is the correct answer.

When a Country Abandons a No-Trade Policy,adopts a Free-Trade Policy,and