When a country abandons a no-trade policy,adopts a free-trade policy,and becomes an importer 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 shifts from a no-trade policy to a free-trade policy and becomes an importer of a particular good, the domestic producers of that good will face more competition from foreign producers. This increased competition will cause the domestic producers' surplus to decrease. However, the decrease in producer surplus will be offset by a gain in consumer surplus, which will increase the total surplus in the market. Therefore, in this scenario, the producer surplus decreases and the total surplus increases in the market for that good.

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