Figure 7-6 -Refer to Figure 7-6. When the price falls from P₂ to P₁, producer surplus A)decreases by an amount equal to C. B)decreases by an amount equal to A+B. C)decreases by an amount equal to A+C. D)increases by an amount equal to A+B.

Question

Quizplus · Accepted Answer

Producer surplus decreases by the areas A and B combined when the price falls, as these represent the lost revenue for producers due to the lower price.

Figure 7-6 -Refer to Figure 7-6. When the Price Falls from P2

Figure 7-6 -Refer to Figure 7-6. When the Price Falls from P₂