The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve and DUS is the domestic demand curve. The United States trades freely with the rest of the world. The world price of a T-shirt is $5.
-Based on the figure above,international trade leads to

Question

Quizplus · Accepted Answer

Without trade, the price in the US market would be $8 and the quantity demanded and supplied would be 20 million T-shirts. However, with the world price of $5, US consumers will demand 30 million T-shirts and US producers will supply 10 million T-shirts. This means that the US will import 20 million T-shirts from the rest of the world.

At the world price, US consumers will gain $90 million in surplus (the difference between the value they place on the T-shirts and the price they actually pay) and US producers will lose $30 million in surplus (the difference between the price they would like to charge and the price they actually receive).

The net gain of surplus is $60 million ($90 million in consumer surplus minus $30 million in producer surplus). Therefore, A is the correct answer.

The Figure Above Shows the U