The total gains from trade within a price system is
A) the area beneath the market demand curve and above the market clearing price plus the area above the market supply curve and beneath the market clearing price.
B) the area beneath the market supply curve and above the market clearing price plus the area above the market demand curve and beneath the market clearing price.
C) the area beneath the market demand curve and above the market clearing price minus the area beneath the market supply curve and beneath the market clearing price.
D) always equal to zero.

Question

Quizplus · Accepted Answer

The total gains from trade within a price system are represented by the sum of consumer surplus and producer surplus. Consumer surplus is the area beneath the market demand curve and above the market clearing price, while producer surplus is the area above the market supply curve and beneath the market clearing price. Therefore, option A correctly describes the total gains from trade.

The Total Gains from Trade Within a Price System Is