Figure 9-1

Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Under autarky, the consumer surplus is

Question

Figure 9-1
  
Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Under autarky, the consumer surplus is

Quizplus · Accepted Answer

Under autarky (no trade), the equilibrium price is $30 and the equilibrium quantity is 10 million pairs of shoes. The consumer surplus is the area below the demand curve and above the equilibrium price, which is (1/2)($30-$15)(10 million) = $75 million. The producer surplus is the area above the supply curve and below the equilibrium price, which is (1/2)($30-$10)(10 million) = $100 million. Therefore, the total surplus is $175 million. Since consumers only pay $45 million for the shoes (10 million pairs of shoes times the $30 price) in autarky, their surplus is $75 million - $45 million = $30 million per year, or $195 million over 6.5 years (the given time period).

Figure 9-1 Figure 9-1 Shows the U.S. Demand and Supply for Leather