Question

Suppose that Sakhalin, an island off the eastern coast of Russia, declares its independence and becomes an exporter of oil. Please determine which of the statements would be true and which would be false in this situation.

Answer 1

In order for oil producers in Sakhalin to decide to export, the world price must be below the domestic price ... FALSE

-As the country begins to export, producer surplus will increase... TRUE

-B/c the oil is produced domestically, residents of Sakhalin will pay less than the world price ... FALSE

-Even after trade is open, the producer surplus and consumer surplus will be equal ... FALSE