Figure 9-18

question 59

Multiple Choice

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)$25 decrease in consumer surplus.
• B)$20 increase in consumer surplus.
• C)$25 decrease in producer surplus.
• D)$20 increase in producer surplus.

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Definitions:

Variable Cost

Variable cost is the cost that changes in direct proportion to the volume of output or activity in production, services, or other cost-incurred activities.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a business.

Contribution Margin

The amount by which the unit selling price exceeds the unit variable cost.