Figure 9-3.The domestic country is China.
-Refer to Figure 9-3.The increase in total surplus in China when trade is allowed is

Question

Figure 9-3.The domestic country is China. 
-Refer to Figure 9-3.The increase in total surplus in China when trade is allowed is

Quizplus · Accepted Answer

The increase in total surplus in China when trade is allowed can be calculated as the area of rectangle AEFB. The height of the rectangle is the difference between the world price of $8 and the domestic price of $4, which is $4. The width of the rectangle is the quantity traded, which is 125. Therefore, the increase in total surplus is $4 x 125 = $500. Therefore, the correct answer is B) $500.

Figure 9-3.The Domestic Country Is China