Answer
a) Please see the first graph.
b) Please see the second graph.
c) Consumers benefit, and producers lose some of their surpluses. Exporting countries (such as the Dominican Republic) should be concerned about the expansion of the Chinese textile industry since exporting countries lose some of their overall surplus when the world price of clothing decreases. Importing countries (such as the United States) should applaud the expansion of the Chinese textile industry since importing countries gain additional total surplus when the world price of clothing increases.
Work Step by Step
a) Please see the first graph. The original price (before China expanded its clothing industry) was at $P_{0}$, and China expanding their clothing industry lowers the price to $P_{1}$.
Originally, consumer surplus was area $A$, and producer surplus was the sum of areas $B+C+D+F$. Thus, total surplus was the sum of areas $A+B+C+D+F$.
With the expansion of China's clothing industry, consumer surplus increases to the sum of areas $A+B+C+D+E$. Producer surplus decreases to area $F$ (since producers who sell above the new price wouldn't have any consumers). Thus, total surplus increases to the sum of areas $A+B+C+D+E+F$.
b)
Please see the second graph. The original price (before China expanded its clothing industry) was at $P_{0}$, and China expanding their clothing industry lowers the price to $P_{1}$.
Originally, consumer surplus was the sum of areas $A+B+C$, and producer surplus was the sum of areas $D+F$. Thus, total surplus was the sum of areas $A+B+C+D+F$.
With the expansion of China's clothing industry, consumer surplus increases to the sum of areas $A+B$. Producer surplus decreases to area $D+E+F$ (since producers who sell above the new price wouldn't have any consumers). Thus, total surplus decreases to the sum of areas $A+B+D+E+F$.
