Figure 9-1

Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.The market price falls to $24.What areas represent consumer surplus and domestic producer surplus?

Question

Figure 9-1
  
Figure 9-1 shows the U.S. demand and supply for leather footwear.
-Refer to Figure 9-1.Suppose the government allows imports of leather footwear into the United States.The market price falls to $24.What areas represent consumer surplus and domestic producer surplus?

Quizplus · Accepted Answer

At the original equilibrium price of $30, the consumer surplus is represented by triangle R and the producer surplus is represented by triangle V. When the price falls to $24 due to imports, the new consumer surplus is represented by the area of triangles R, S, T, and U, and the new producer surplus is represented by the area of triangle V. Therefore, the correct choice is B. Option A is incorrect because it only includes the original consumer surplus and producer surplus, not the additional areas of surplus created by the lower price. Option C is incorrect because it includes surplus areas that do not exist in the diagram. Option D is also incorrect because it does not include all the additional consumer surplus created by the lower price.

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