Use the following to answer question:
-(Figure: The Market for Calculators) Use Figure: The Market for Calculators.Assume that S and D represent the domestic demand and supply of calculators.The world price,P_W,equals $100.When the economy moves from autarky,under which the price is $150,to free trade,consumer surplus rises by area _____ and producer surplus falls by _____.

Question

Use the following to answer question:

-(Figure: The Market for Calculators) Use Figure: The Market for Calculators.Assume that S and D represent the domestic demand and supply of calculators.The world price,P_W,equals $100.When the economy moves from autarky,under which the price is $150,to free trade,consumer surplus rises by area _____ and producer surplus falls by _____.

Quizplus · Accepted Answer

In moving from autarky to free trade, consumer surplus increases by the areas under the domestic price and above the world price (B + C + G + H + I + J + K + L) because consumers can now buy the product at a lower price. Producer surplus decreases by the area that was above the world price but below the domestic price (B + C), as domestic producers now receive less for what they sell.

Use the Following to Answer Question