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-(Figure: The Market for Beats by Dre) Use Figure: The Market for Beats by Dre.Assume that S_d represents the domestic supply curve and D_d represents the domestic demand curve.If the world price equals $100 and there is free trade,what is the gain in consumer surplus?

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-(Figure: The Market for Beats by Dre) Use Figure: The Market for Beats by Dre.Assume that S_d represents the domestic supply curve and D_d represents the domestic demand curve.If the world price equals $100 and there is free trade,what is the gain in consumer surplus?

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When the world price is $100 and there is free trade, the domestic price will also be $100. At this price level, the quantity demanded exceeds the quantity supplied, resulting in a shortage. The quantity demanded is Q2 and the quantity supplied is Q1, with a difference of Q2-Q1 being the amount imported. The gain in consumer surplus will be the area of the triangle between the world price ($100), the demand curve, and the domestic price ($100). This area is (1/2)(Q2-Q1)(100-0) = (1/2)(220-160)(100) = $2.25 million.

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