The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market.
Figure 10-3
-In Figure 10-3,for the rest of the world:
A)the gain in producer surplus equals the gain in consumer surplus.
B)producer surplus increases while consumer surplus is unchanged.
C)the gain in consumer surplus is greater than the gain in producer surplus.
D)there are no changes in consumer or producer surplus after trade.

Question

The following figure shows the demand and supply for a commodity in the domestic U.S.market as well as the global market.The commodity is imported from the rest of the world to the U.S.market.
Figure 10-3 
-In Figure 10-3,for the rest of the world:
A)the gain in producer surplus equals the gain in consumer surplus. 
B)producer surplus increases while consumer surplus is unchanged. 
C)the gain in consumer surplus is greater than the gain in producer surplus. 
D)there are no changes in consumer or producer surplus after trade.

Quizplus · Accepted Answer

In the global market, the increase in demand leads to an increase in the global price, resulting in an increase in producer surplus for the rest of the world. However, since the rest of the world is exporting the commodity to the U.S. market, the increase in price also leads to a decrease in the quantity demanded by the U.S. consumers, resulting in no change in consumer surplus. Therefore, the gain in producer surplus for the rest of the world is not offset by a loss in consumer surplus, making choice B the correct answer.

The Following Figure Shows the Demand and Supply for a Commodity