Figure: The Market for Oranges in South Africa
(Figure: The Market for Oranges in South Africa) Look at the figure The Market for Oranges in South Africa.In autarky, the price of oranges in South Africa is P₁.When the economy is opened to trade, the price falls to PW and the change in total surplus is:

Question

Quizplus · Accepted Answer

The change in total surplus is the sum of consumer surplus and producer surplus.
In autarky, the consumer surplus is area P + M and the producer surplus is area N. Therefore, the total surplus is P + M + N.
When the economy is opened to trade, the price falls to PW. The new consumer surplus is area P  and the new producer surplus is area P + N + O. Therefore, the total surplus is P + P + N + O, which simplifies to 2P + N + O.
The change in total surplus is the new total surplus minus the original total surplus, which is (2P + N + O) - (P + M + N) = P + O - M.
Therefore, the correct answer is B) O + P.

Figure: the Market for Oranges in South Africa