Answer
a) True
b) False
c) False
Work Step by Step
a) When the world price is lower than the domestic equilibrium price, the quantity demanded will increase more when the elasticity of demand is more elastic. Due to this increased quantity demanded, the consumer surplus will increase (and continue to increase as the elasticity increases).
b) The price of an imported good is lower than the original equilibrium price. Thus, when the good is imported (at the lower price), consumer surplus increases.
c) Since the demand is perfectly inelastic, there is no change in demand when the country imports at the world price. However, consumers purchase at the lower price (and increase consumer surplus). Producer surplus does decrease, but the decrease will be less than the complete amount that consumer surplus increased.
