How are gains from trade measured?
A) by the sum of consumer and producer surplus
B) by producer surplus
C) by producer surplus minus consumer surplus
D) by consumer surplus

Question

Quizplus · Accepted Answer

Gains from trade are measured by the sum of consumer and producer surplus. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between the price at which producers are willing to sell and the actual price they receive. The sum of these two surpluses represents the gains from trade. Therefore, choice A is the correct answer.

How Are Gains from Trade Measured