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 consumer surplus that consumers could gain if the trade restriction were removed?
A) $35,000
B) $22,500
C) $30,000
D) $25,000

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 consumer surplus that consumers could gain if the trade restriction were removed?
A) $35,000 
B) $22,500 
C) $30,000 
D) $25,000

Quizplus · Accepted Answer

The dollar value of consumer surplus gained if the trade restriction is removed is the area of the triangle below the world price (Pw) but above the domestic price with the restriction (Pd'). The height of the triangle is the quantity demanded domestically (Qd) and the base is the difference between the world price and the restricted domestic price (Pw - Pd'). Therefore, the area is (1/2) x (Pw - Pd') x Qd = (1/2) x ($8.50 - $5.50) x 6,000 = $30,000. Thus, the answer is C.

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