Suppose the price of wine in Berylia is higher than the world price of wine. If the market for wine is opened to international trade, how will the total surplus in the market get affected?
When the domestic market for wine is opened to international trade, consumers and producers trade at the world price, which causes a reduction in the domestic quantity supplied and an increase in the domestic quantity demanded. Berylia must import this difference between the quantity demanded and quantity supplied from abroad. Consumers of wine in Berylia would benefit from trade since consumer surplus rises, but producers of wine in Berylia are harmed by trade since producer surplus falls. As a result, ultimately, total surplus rises.
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Jennifer owns a pig farm near Salina, Kansas. Last year she earned $39,000 in total revenue while incurring $38,000 in explicit costs. She could have earned $27,000 as a teacher in Salina. These are all her revenue and costs
Therefore Jennifer earned an A) accounting profit of $1,000 but incurred an economic loss of $26,000. B) accounting profit of $1,000 but incurred an economic loss of $65,000. C) accounting profit of $1,000 but incurred an economic loss of $38,000. D) economic profit of $1,000. E) None of the above answers is correct.
A firm encounters its "shutdown point" when:
A) average total cost equals price at the profit-maximizing level of output. B) average variable cost equals price at the profit-maximizing level of output. C) average fixed cost equals price at the profit-maximizing level of output. D) marginal cost equals price at the profit-maximizing level of output.