Exhibit 2 Refer to Exhibit 2. If free trade is allowed, producer surplus is the
A) Area B + C + D
B) Area A + B + C
C) Area B + C
D) Area A + B + C + D
E) Area C

Question

Exhibit 2  ​ Refer to Exhibit 2. If free trade is allowed, producer surplus is the
A) Area B + C + D 
B) Area A + B + C 
C) Area B + C 
D) Area A + B + C + D 
E) Area C

Quizplus · Accepted Answer

Producer surplus is defined as the difference between the price at which a producer is willing to sell a good and the actual price they receive. In this exhibit, if free trade is allowed, the price of the good will increase from p1 to p2. As a result, the producer surplus will increase from Area A to Area B + C + D. Therefore, the correct answer is A (Area B + C + D).

Exhibit 2 ​ Refer to Exhibit 2

Exhibit 2 Refer to Exhibit 2