Figure: The Home and World Market (Figure: The Home and World Markets) The loss of consumer
Surplus in the home country is:
A)$480.
B)$540.
C)$160.
D)$600.

Question

Figure: The Home and World Market  (Figure: The Home and World Markets) The loss of consumer
Surplus in the home country is:
A)$480. 
B)$540. 
C)$160. 
D)$600.

Quizplus · Accepted Answer

The consumer surplus in the home market is represented by the area A+B+C+D+E+F+G+H. After trade, the domestic price increases from P1 to P2, resulting in a decrease in consumer surplus to the area A. The new domestic quantity demanded is represented by point J. The loss of consumer surplus is the area B+C+D+E+F+G+H+I, which is equal to ($30+$20+$50+$80+$120+$70+$60+$20) = $540.

Figure: the Home and World Market (Figure: the Home