Price Q1 Q2Q3 Q4 Q Quantity Refer to the diagram, which represents a country\'s

Question

Price Q1 Q2Q3 Q4 Q Quantity Refer to the diagram, which represents a country's supply and demand for an internationally traded good. If PW is the world price, and a foreign country engages in dumping by selling at P1, the country's consumer surplus will a. Increase; bcd b. Increase; abcd c. Decrease; abcd d. Decrease; a If PW is the world price, and a foreign country engages in dumping by selling at P1, the country's producer surplus will a. Decrease; abcd b. Increase; bcd c. Decrease:a d. Increase; abcd If PW is the world price, and a foreign country engages in dumping by selling at P1, the country's total social surplus will a. Decrease; abc

Explanation / Answer

Dumping by selling at P1:

Consumer surplus increases by abcd (option b is correct, area under the demand curve and above the new price line increases)

Producer surplus decreases by a (option c is correct, area under the new price line and above the supply curve decreases)

Total social surplus = CS + PS

- Increases by bcd (option d is correct)

Dumping by selling at P2:

Total domestic production will decrease to zero (option a is correct, supply corresponding to P2 = 0)

Total domestic consumption will increase to Q5 (option a is correct, demand corresponding to P2 = Q5)

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