Figure 925 The following diagram shows the domestic demand a

Figure 9-25 The following diagram shows the domestic demand and supply in a market. Assume that the world price in this market is S10 per unit. Price 45 40 35 30 25 20 15 10 Supply Demand 20 40 600 100 120140160 Quantity Refer to Figure 9-25. With free trade, total surplus is a. $800 b. $1,200 c. $1,600 d. $2,000

Solution

1)

Total surplus = CS+PS

CS = 0.5(120)(30)

= 1800

PS = 0.5(10)(40)

     = 200

Total surplus = 1800+200

                            = 2,000

2)

Right answer is (C)

Measurement of income inequality does not include life time income of people.