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 producer 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 producer surplus at the equilibrium price of P₁?

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the equilibrium price. At price P1, this is represented by area D + E.

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