The dairy industry is an example of cartel pricing: the government has set milk prices artificially high. Sketch a graph of a supply curve (call it $s$) and a demand curve (call it $d$). Label the equilibrium price $p^{*}$ and quantity $q^{*}$. Then label a price $p^{+}$ that is greater than $p^{*}$. Let $q^{+}$ be the quantity for which the demand curve passes through $p^{+}$.

Because it's hard to enter $p^{*}$, $p^{+}$, etc., in the homework system, let's call the equilibrium price pstar, the equilibrium quantity qstar, and similarly call the increased price pplus and corresponding quantity qplus.

(a) On your graph, mark an area corresponding to the consumer surplus when the price is pplus. Express this area as an integral (which may involve some of $s$, $d$, and the prices and quantities pstar, pplus, qstar and qplus):
consumer surplus $= \int_a^b\,$ $dq$,
where $a =$ and $b =$ .

(b) Similarly, on your graph mark an area corresponding to the producer surplus when the price is pplus. Express this area as an integral (which may also involve some of $s$, $d$, and the prices and quantities pstar, pplus, qstar and qplus):
producer surplus $= \int_a^b\,$ $dq$,
where $a =$ and $b =$ .

(c) The total gains from trade are given by the sum (Consumer surplus + Producer surplus). How does this sum change when the price is changed from $p^{*}$ to $p^{+}$?
? the sum increases the sum stays the same the sum decreases