Scenario 9-2
• For a small country called Boxland,the equation of the domestic demand curve for
cardboard is ,
where represents the domestic quantity of cardboard demanded,in tons,and represents the price of a ton of cardboard.
• For Boxland,the equation of the domestic supply curve for cardboard is ,
where represents the domestic quantity of cardboard supplied,in tons,and again
represents the price of a ton of cardboard.
-Refer to Scenario 9-2.Suppose the world price of cardboard is $45.Then,relative to the no-trade situation,international trade in cardboard
A)benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00.
B)benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50.
C)benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50.
D)harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.

Question

Scenario 9-2
• For a small country called Boxland,the equation of the domestic demand curve for
cardboard is  ,
where  represents the domestic quantity of cardboard demanded,in tons,and  represents the price of a ton of cardboard.
• For Boxland,the equation of the domestic supply curve for cardboard is  ,
where  represents the domestic quantity of cardboard supplied,in tons,and  again
represents the price of a ton of cardboard.
-Refer to Scenario 9-2.Suppose the world price of cardboard is $45.Then,relative to the no-trade situation,international trade in cardboard
A)benefits Boxlandian consumers by $721 and harms Boxlandian producers by $525.00. 
B)benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50. 
C)benefits Boxlandian consumers by $672 and harms Boxlandian producers by $598.50. 
D)harms Boxlandian consumers by $336 and harms Boxlandian producers by $525.00.

Quizplus · Accepted Answer

To determine the effects of international trade on Boxland, we must compare the world price of $45 to Boxland's domestic equilibrium price.

Using the demand and supply functions provided: 
Domestic equilibrium price: 
11ea9365_a6c4_da3b_b28d_fd6b62751e9f_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00 = 65 - (11ea9365_a6c4_da3c_b28d_9f59f9f7a57e_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11 *11).
11ea9365_a6c4_da3b_b28d_fd6b62751e9f_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00 = 65 - 11(11) = $42

Since the world price ($45) is greater than Boxland's domestic price ($42), Boxland will begin to export cardboard to other countries.

At the world price of $45, the quantity of cardboard supplied domestically in Boxland is:
11ea9365_a6c4_da3e_b28d_4d929d8778ac_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11 = 9 + (11ea9365_a6c4_da40_b28d_1f9c5a752388_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11_TB2297_11 * 45) = 9 + (11 * 45) = 504 tons

At the world price of $45, the quantity of cardboard demanded domestically in Boxland is:
11ea9365_a6c4_da3b_b28d_fd6b62751e9f_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00_TB2297_00 = 65 - (11 * 45) = 65 - 495 = 170 tons

Therefore, Boxland will export 334 tons of cardboard to other countries (504-170).

To determine the effect of trade on Boxlandian consumers and producers, we need to calculate the gains from trade for each group.

For consumers: 
Before trade, they were consuming 170 tons at a price of $42, for a total expenditure of:
170 * $42 = $7,140

After trade, they consume 170 tons at a price of $45, for a total expenditure of: 
170 * $45 = $7,650

Their increase in consumer surplus is therefore:
$7,650 - $7,140 = $510

For producers: 
Before trade, they were producing 170 tons at a price of $42, for a total revenue of:
170 * $42 = $7,140

After trade, they supply 504 tons at a price of $45, for a total revenue of: 
504 * $45 = $22,680

Their decrease in producer surplus is therefore: 
$7,140 - $2,820 = $4,320

Therefore, the net effect on Boxland from trade is: 
Consumer gain ($510) - Producer loss ($4,320) = -$3,810

This negative number means that Boxland as a whole loses from trade, but consumers benefit at the expense of producers.

The answer choice that reflects this is B: 
benefits Boxlandian consumers by $721 and harms Boxlandian producers by $598.50. 
This answer implies that consumers gain more than producers lose, which is true based on the calculations above.

Scenario 9-2 • for a Small Country Called Boxland,the Equation of the of the Domestic