A ban on imported avocadoes will result in_______
a. an increase in the total surplus because domestic production will increase.
b. no change in total surplus because the reduction in consumer surplus will offset the increase in producer surplus
c. a reduction in total surplus because deadweight loss is created.
d. It is impossible to say what will happen to total surplus.
Ms. Sue the answer is A.
I don't think so, but I really don't know.
To determine the correct answer, we need to understand the concept of total surplus and the impact of a ban on imported avocadoes.
Total surplus is a measure of the overall economic welfare in a market. It is determined by adding consumer surplus (the difference between what consumers are willing to pay for a good and what they actually pay) and producer surplus (the difference between the price producers receive and the cost of production).
Now, let's analyze the options:
a. "An increase in the total surplus because domestic production will increase." This option suggests that if there is a ban on imported avocadoes, domestic production will increase. If domestic production increases, it can potentially lead to additional producer surplus and, depending on the price, consumer surplus may also be affected positively. Therefore, if domestic production increases, it is plausible that there could be an increase in total surplus. This option could be a possible answer.
b. "No change in total surplus because the reduction in consumer surplus will offset the increase in producer surplus." This option suggests that the reduction in consumer surplus due to the ban on imported avocadoes will offset any increase in producer surplus. If the reduction in consumer surplus is equal to the increase in producer surplus, then the total surplus will remain unchanged. However, this assumes that the reduction in consumer surplus perfectly offsets the increase in producer surplus, which might not always be the case. This option does not necessarily reflect what will happen to total surplus as it depends on the magnitude of the offsetting effects.
c. "A reduction in total surplus because deadweight loss is created." This option acknowledges the creation of deadweight loss, which typically occurs when there is a distortion in the market due to policies like a ban on imported goods. Deadweight loss represents a loss in total surplus, indicating an inefficiency in the market. Therefore, this option suggests that total surplus will decrease if a ban on imported avocadoes is implemented. This option could also be a potential answer.
d. "It is impossible to say what will happen to total surplus." This option implies that there is not enough information given to determine the impact on total surplus.
From the given options, options a, c, and d seem somewhat plausible, but option a appears to be the most reasonable choice since an increase in domestic production can potentially lead to higher total surplus. Therefore, we can conclude that Ms. Sue's answer of option A is likely correct.