### Graph ExplanationThe diagram is a supply and demand graph representing the market for saddles, illustrating the effects of a tariff. - **Axes**: - The vertical axis represents the "Price per Saddle." - The horizontal axis represents the "Quantity of Saddles."- **Curves**: - The upward sloping line is the "Domestic Supply" curve. - The downward sloping line is the "Domestic Demand" curve.- **Horizontal Line**: - The line at the "World Price" level, which becomes higher after the introduction of a tariff. The tariff increases the price from $ P_1 $ to $ P_2 $.- **Areas**: - **A and B**: Triangular areas between the Domestic Supply and Demand curves above the world price $ P_1 $ before the tariff. - **C, D, E, F**: Rectangular and triangular areas between the world price $ P_1 $ and the higher tariff-included price $ P_2 $. - **G**: Triangular area below the world price $ P_1 $.- **Quantities**: - $ Q_1 $, $ Q_2 $, $ Q_3 $, $ Q_4 $ indicate different levels of quantity of saddles, showing changes in quantity before and after the tariff.### QuestionBefore the tariff is implemented, what is the size of consumer surplus?### Options- A- A + B- A + B + C + D + E + F- G + CThe correct answer for consumer surplus before the tariff is the area above the world price $ P_1 $ and below the demand curve.

Consumer surplus is the area below demand and above price and left of the traded quantity.

Answered: Price per Saddle Domeslic Supply P2…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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12 11 10 9 8 7 6 2 G A B The tariff Di E F Domestic supply World price + tariff World price Domestic demand 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Q O decreases producer surplus by the area C. O increases producer surplus by the area C. O decreases producer surplus by areas C, D, E and F. O increases producer surplus by the area C + G.

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Price per Saddle Domeslic Supply P2 Tariff World Price P1 Domestic Demand Q1 Q2 Q3 Q4 Quantity of Saddles Before the tariff is implemented, what is the size of consumer surplus? O A + B OA + B + C + D + E + F NG + Ç