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.In the country for which the figure is drawn,total surplus with 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.In the country for which the figure is drawn,total surplus with international trade in cars

Quizplus · Accepted Answer

With international trade, the price of cars decreases from P1 to P2, resulting in an increase in consumer surplus from A to A + B + C and a decrease in producer surplus from A + B to B + C. However, the increase in consumer surplus is larger than the decrease in producer surplus, resulting in an overall increase in total surplus represented by the area A + B + C + D, which is larger than the total surplus without international trade. Therefore, D is the correct choice.