Use the following to answer questions:
Figure: Foreign Trade 2
-(Figure: Foreign Trade 2) Refer to the figure. What is the dollar value of the deadweight loss created as a result of prohibiting trade in this market?
A) $2,500
B) $10,000
C) $7,500
D) $5,000

Question

Use the following to answer questions:
Figure: Foreign Trade 2 
-(Figure: Foreign Trade 2) Refer to the figure. What is the dollar value of the deadweight loss created as a result of prohibiting trade in this market?
A) $2,500 
B) $10,000 
C) $7,500 
D) $5,000

Quizplus · Accepted Answer

The deadweight loss is calculated as the area of the triangle formed between the supply and demand curves due to the prohibition of trade. The base of this triangle is the difference in quantity between the equilibrium quantity and the quantity with no trade, and the height is the difference in price. The area of this triangle represents the deadweight loss, which is $5,000.

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