You visit another small, wealthy country. In that country, the wealthier people tend to drive cars that have excellent miles-per-gallon and run quite cleanly (i.e., they do not emit much smoke). The lower-income people (who are not that poor, because it is a wealthy country) tend to drive cars that use more fuel per gallon and emit more smoke. You learn that, in an effort to reduce pollution, the country has just begun to provide subsidies of $7,500 per car to lower-income people who buy new cars of the type typically driven by the wealthier people. It turns out that some of the low-income people are selling their new cars to

wealthy residents at a price a little below the price that the wealthy residents would otherwise pay for a new car purchased from the dealer. You talk with two reporters. One suggests that stopping these types of resale (i.e., stopping people who buy subsidized cars from selling their cars to wealthy people) would increase total surplus. The other reporter disagrees, arguing that the existence of the voluntary trades indicates mutual gains from exchange. How would you respond to these claims? What I am looking for here is a nicely written explanation of the key points. Some good answers will be longer than others, but I would expect that somewhere between a half-page and a full- page answer, single-spaced, would be enough to cover the essential points.