Figure 9-1
The figure illustrates the market for wool in New Zealand.
-Refer to Figure 9-1.With trade,total surplus in the New Zealand wool market amounts to

Question

Figure 9-1
The figure illustrates the market for wool in New Zealand. 
-Refer to Figure 9-1.With trade,total surplus in the New Zealand wool market amounts to

Quizplus · Accepted Answer

Total surplus is the sum of consumer surplus and producer surplus. In the absence of trade, consumer surplus would be triangle A and producer surplus would be triangle B. However, with trade, consumer surplus increases to triangle A + C + D, while producer surplus increases to triangle B + E. Therefore, total surplus with trade is (A + C + D) + (B + E) = 122.5 + 345 = 467.5.

Figure 9-1 The Figure Illustrates the Market for Wool in New Zealand