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 producer surplus gained as a result of prohibiting trade in this market?
A) $15,000
B) $30,000
C) $12,500
D) $22,500

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 producer surplus gained as a result of prohibiting trade in this market?
A) $15,000 
B) $30,000 
C) $12,500 
D) $22,500

Quizplus · Accepted Answer

The producer surplus without trade is the area of triangle BCD. The base of the triangle is 1500 and the height is 15, so the area is (1/2)(1500)(15) = $11,250. The producer surplus with trade is the area of rectangle ABCD minus the area of triangle ABE. The rectangle has an area of 1500 * 25 = $37,500. The triangle has a base of 750 and a height of 10, so the area is (1/2)(750)(10) = $3,750. Therefore, the producer surplus with trade is $37,500 - $3,750 = $33,750. The difference between the two is $33,750 - $11,250 = $22,500.

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