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 Q2 in order to raise the price to P2.
-Refer to Figure 4-3.What area represents producer surplus at P2?

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 Q2 in order to raise the price to P2.
-Refer to Figure 4-3.What area represents producer surplus at P2?

Quizplus · Accepted Answer

Producer surplus is the difference between the price producers receive for their goods and the minimum price they are willing to accept. At P2, the minimum price producers are willing to accept is P1. Therefore, producer surplus is represented by the area above P1 and below P2, which is B.

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