Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country

-Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers,as indicated by the supply schedule SM (with subsidy).??As a result of the subsidy Mexican steel producers gain ____ of producer surplus.

Question

Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country
 
-Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers,as indicated by the supply schedule SM (with subsidy).??As a result of the subsidy Mexican steel producers gain ____ of producer surplus.

Quizplus · Accepted Answer

The producer surplus gain is calculated by the area of the triangle formed by the subsidy, which is 0.5 * base * height. Here, the base is the quantity increase due to the subsidy, and the height is the subsidy amount ($200). Assuming the quantity increase is 6 tons, the gain is 0.5 * 6 * 200 = $600.

Figure 51 Illustrates the Steel Market for Mexico,assumed to Be a a "Small