Figure 4-3 Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂in order to raise the price to P_2.
-Refer to Figure 4-3.What area represents consumer surplus at the equilibrium price of P₁?

Question

Figure 4-3

Figure 4-3 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂in order to raise the price to P_2.
-Refer to Figure 4-3.What area represents consumer surplus at the equilibrium price of P₁?

Quizplus · Accepted Answer

At the equilibrium price of P₁, consumer surplus is represented by area A + B + C. When the price is raised to P_2., consumer surplus decreases to area A only, while producer surplus increases from area D + E to area B + D. Therefore, the best choice is B as it represents the total surplus (consumer plus producer surplus) in the market after the output cut.

Figure 4-3 Figure 4-3 Shows the Market for Granola