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March 28, 2017

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I am on the chapter for International Trade in the book. I neew to calculate the producer surplus after a trade and I am not sure if I am doing it right.

Graph:

Price of
Pencil Sharpeners
$16__________________________World Price
>>>>>>>|>>>>>>>>>>>>>>>>>>>>>|
>>>>>>>|>>>>>>>>>>>>>>>>>>>>>|
$12----|-----|>>>>>>>>>>>>>>>|
>>>>>>>|>>>>>|>>>>>>>>>>>>>>>|
>>>>>>>|>>>>>|>>>>>>>>>>>>>>>|
>>>>>>>|>>>>>|>>>>>>>>>>>>>>>|
$4>>>>>|>>>>>|>>>>>>>>>>>>>>>|
$0____200___300_____________450 Quantity

World Price after the trade $16 and quantity supplied is 450

Quantity demanded at world price after the trade is 200

Equalibrium before the trade was $12 and quantity supplied 300

I did what I could to draw the graph. I hope it is understandable at your end.

Question:

According to the graph, producer suplus in China after trade is:

A.$800
B.$1,200
C$1.800
D$2,700

I calculated $16 world price less $4 equals $12. $12 times 450 quantity supplied equals $5,400. $5,400 times
.5 euqals $2,700.

If my calculation is correct then D would be the answer?

  • Economics - ,

    Hummm. As you can see, graphing in Jiskha doesnt really work. That said, producer surplus is represented by the area below price and above supply. If this is some triangle, use the geometry formula for calculating the area of a triangle.

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