Scenario: Now suppose the United States continues to trade wheat freely with the rest of the world but that the world price is $6 per bushel, as shown in the figure below.

-Refer to the scenario above.The gain in producer surplus from free trade at the world price of $6 per bushel is represented by area ________.

Question

Scenario: Now suppose the United States continues to trade wheat freely with the rest of the world but that the world price is $6 per bushel, as shown in the figure below.
 
-Refer to the scenario above.The gain in producer surplus from free trade at the world price of $6 per bushel is represented by area ________.

Quizplus · Accepted Answer

The gain in producer surplus from free trade at the world price of $6 per bushel is represented by the area F + G, which is the difference between the domestic supply curve and the world price. Area B represents the loss in producer surplus due to the domestic price being lower than the world price. Areas H and I represent the gain in consumer surplus due to the lower domestic price, but they are not relevant to the gain in producer surplus.

Scenario: Now Suppose the United States Continues to Trade Wheat