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* Trade benefits soybean producers because they can sell at a higher price. Producer surplus rises by the area B + D. Trade makes domestic buyers worse off because they have to pay a higher price. Consumer surplus falls by the area B. The gains to producers are greater than the losses to consumers, so trade increases total welfare: total surplus rises by the amount D. The two preceding slides show students the analysis of trade when the country exports. The next step is to cover the analysis of trade when the country imports the good. Instead of lecturing on this material, I suggest you have students work on this exercise, which students to do this analysis themselves. It’s an activity that breaks up the lecture and gives students a chance to apply the techniques you’ve just presented. I suggest you have students work on it in pairs. Give them about 5 minutes, then go over the answers on the following two slides. While students are working, circulate around the room and offer to assist any students that ask for help. This will also give you a sense of how well students are understanding the material. If you prefer to lecture on the material instead, replace these slides with the two “hidden” slides that immediately follow the CHAPTER SUMMARY at the end of this file. You will then have to “unhide” those slides by unselecting “Hide Slide” from the “Slide Show” drop-down menu. PD PW, so this country will import plasma TV sets from abroad. The quantity of imports is simply the difference between the quantity demanded by domestic consumers and the quantity supplied by domestic firms at the world price. Trade benefits consumers in this case because it allows them to buy plasma TVs at lower prices, so more consumers can afford plasma TVs if imports are allowed. The gains to consumers appear on the graph as the area (B+D), which represents the increase in consumer surplus when the country allows trade. In this example, trade harms domest
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