Figure 9-18.On the diagram below,Q represents the quantity of peaches and P represents the price of peaches.The domestic country is Isoland.
-Refer to Figure 9-18.Suppose Isoland changes from a no-trade policy to a policy that allows international trade.If the world price of peaches is $5,then the policy change results in
A)a decrease in consumer surplus.
B)an increase in producer surplus.
C)an increase in total surplus.
D)All of the above are correct.

Question

Figure 9-18.On the diagram below,Q represents the quantity of peaches and P represents the price of peaches.The domestic country is Isoland. 
-Refer to Figure 9-18.Suppose Isoland changes from a no-trade policy to a policy that allows international trade.If the world price of peaches is $5,then the policy change results in
A)a decrease in consumer surplus. 
B)an increase in producer surplus. 
C)an increase in total surplus. 
D)All of the above are correct.

Quizplus · Accepted Answer

When Isoland allows international trade and the world price of peaches is $5, domestic consumers pay the world price, which is lower than the domestic price, leading to a decrease in consumer surplus. Producers can sell at the higher world price, increasing producer surplus. The overall effect is an increase in total surplus due to the gains from trade, making all options correct.