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The before-trade domestic price of tomatoes in the United States is $500 per ton. The world price of tomatoes is $400 per ton. The U.S. is a price-taker in the tomatoes market. If trade in tomatoes is not allowed, the price of tomatoes in the United States:______

a. could increase or decrease or be unaffected; this cannot be determined.
b. will increase, and this will cause consumer surplus to decrease.
c. will be unaffected, and consumer surplus will be unaffected as well.
d. will decrease, and this will cause consumer surplus to increase.

Respuesta :

Answer:

B

Explanation:

The US does not produce tomatoes efficiently. This is because the price of tomatoes in the US is higher when compared with the rest of the world.

The best option for US is to import tomatoes.

If trade is not allowed, the price of tomatoes would increase and consumer surplus would decrease

Consumer surplus is the difference between the willingness to pay of a consumer and the price of the good.

Consumer surplus = willingness to pay – price of the good

If trade is allowed price would decrease and consumer surplus would increase

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