Suppose Ukraine enters a Deep and Comprehensive Free Trade Area (DCFTA) with the European Union (EU). Consequently, import tariffs on industrial machinery from EU member states such as Poland are abolished, whereas tariffs on similar imports from non-member nations like China remain.
In the diagram below, Ukraine's domestic price of industrial machinery falls from P1 P_1\,P1 to P2 P_2\,P2 because Ukrainian buyers can now access tariff-free supply from Poland.
Which of the following represents the net welfare impact to the Ukrainian economy as a result of joining this trade agreement?
X+ZX + ZX+Z
X+Z−WX + Z - WX+Z−W
X+Y+Z−WX + Y + Z - WX+Y+Z−W
Y+W−X−ZY + W - X - ZY+W−X−Z