The gains from trade within a price system is
A) the sum of consumer surplus and producer surplus.
B) consumer surplus less producer surplus.
C) consumer surplus divided by producer surplus.
D) consumer surplus multiplied by producer surplus.

Question

Quizplus · Accepted Answer

The gains from trade within a price system are the sum of the consumer surplus and the producer surplus. This is because the consumer surplus measures the value that consumers receive from a good or service over and above the price they pay, while the producer surplus measures the producer's net benefit from selling a good or service, which is the difference between the price they receive and the cost of production. Therefore, the gains from trade, which are the benefits received by both consumers and producers, are the sum of these two surpluses.

The Gains from Trade Within a Price System Is