When Domestic Production Causes Domestic Pollution
(Figure 12.4)

For the case shown in Figure 12.4, free trade unfortunately makes the country worse off. The usual gain from trade is shown by area a in the graph (a gain of $25 million). Press "Show area a" to show this triangular region on the graph. But the extra production brings pollution that has an extra cost equal to area b, social side cost of $90 million ($0.30 per ream on the additional 300 million reams produced). Press "Show area b" to show this area on the lower graph. Free trade reduces the well-being of the country by $65 million.
Press "Continue" when you are ready to move on. The "Reset" button will clear the graph.