Figure 7.3

Assume that the Canadian government limits the import of peanuts.
-Refer to Figure 7.3.What is the area of domestic producer surplus without a quota?
A)C
B)C + B
C)A + B + C
D)A + B + C + D

Question

Figure 7.3
  
Assume that the Canadian government limits the import of peanuts.
-Refer to Figure 7.3.What is the area of domestic producer surplus without a quota?
A)C 
B)C + B 
C)A + B + C 
D)A + B + C + D

Quizplus · Accepted Answer

Without a quota, domestic producers can produce and sell as much as they want at the equilibrium price of P1. The area of domestic producer surplus is the triangle A, which is the difference between the price received by producers and the minimum amount they are willing to be paid to produce that quantity.

Figure 7.3 Assume That the Canadian Government Limits the Import of Peanuts