Figure 9-7. On the diagram below, Q represents the quantity of cars and P represents the price of cars.

-Refer to Figure 9-7.When the country for which the figure is drawn allows international trade in cars,

Question

Figure 9-7. On the diagram below, Q represents the quantity of cars and P represents the price of cars.
 
-Refer to Figure 9-7.When the country for which the figure is drawn allows international trade in cars,

Quizplus · Accepted Answer

When the country allows international trade in cars, it leads to an increase in total surplus which can be represented by the area D. Consumer surplus may or may not increase depending on the new equilibrium price and quantity, but it cannot be determined from the given diagram. Producer surplus, on the other hand, will increase due to the expansion of the market, even though it might decrease from the original equilibrium point, so option B is not correct. Therefore, option C is the best choice as it correctly reflects the impact of international trade on total surplus.