Refer to the Figure Below to Answer the Following Question

question 69

Multiple Choice

Refer to the figure below to answer the following question.

Figure 7.2.4
-Refer to Figure 7.2.4. The graph shows the demand for shoes in Brazil, DB, the supply of shoes produced in Brazil, SB, and the market equilibrium in Brazil when it does not trade internationally. If the world price of a pair of shoes is $20 and Brazil opens up and trades internationally, producer surplus in Brazil ________ and consumer surplus in Brazil ________.

• A)increases by area C + D; decreases by area C
• B)increases by area C; decreases by area C and a deadweight loss equal to area D arises
• C)increases by area D; decreases by area D
• D)decreases by area C; increases by area C + D
• E)decreases by area C + D; increases by area C

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Definitions:

Medicaid

A federal program that helps finance the medical expenses of individuals covered by the Supplemental Security Income (SSI) and Temporary Assistance for Needy Families (TANF) programs.

Low-income Workers

Individuals employed in jobs that pay wages below a certain threshold, often struggling to meet basic living expenses.

Moral Hazard

A situation in which one party in a transaction has the opportunity to assume additional risks that negatively affect the other party, often arising in insurance and finance.

Underconsume

When consumers buy less of a good or service than is economically efficient, often leading to potential welfare losses.