Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true?
A) Some consumers will gain surplus, but total surplus will fall.
B) Some producers will gain surplus, but total surplus will fall.
C) Some producers will lose surplus, but total surplus will rise.
D) Some consumers will lose surplus, but total surplus will rise.

Question

Assume the market depicted in the graph is in equilibrium. If the market price is set to $14, which of the following statements is true?
A) Some consumers will gain surplus, but total surplus will fall. 
B) Some producers will gain surplus, but total surplus will fall. 
C) Some producers will lose surplus, but total surplus will rise. 
D) Some consumers will lose surplus, but total surplus will rise.

Quizplus · Accepted Answer

If the market price is set to $14, it is above the equilibrium price. This means that quantity supplied will be greater than quantity demanded, resulting in a surplus. Some producers will benefit from this higher price, but overall total surplus (the sum of producer and consumer surplus) will fall because there will be a loss of consumer surplus as some consumers are priced out of the market.

Assume the Market Depicted in the Graph Is in Equilibrium