Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true? I. Some producers will gain surplus.
II) All consumers will lose surplus.
III) Total surplus may increase or decrease.
A) III only
B) I and III only
C) I and II only
D) I, II, and III

Question

Assume the market depicted in the graph is in equilibrium. If the price is subsequently set at $28, which of the following statements is true? I. Some producers will gain surplus.
II) All consumers will lose surplus.
III) Total surplus may increase or decrease.
A) III only 
B) I and III only 
C) I and II only 
D) I, II, and III

Quizplus · Accepted Answer

If the price is set at $28, it is above the equilibrium price of $20, which means quantity supplied will exceed quantity demanded. This will lead to a surplus. 
I. Some producers will gain surplus because they can sell all their goods at the higher price of $28, while other producers may not be able to sell all their goods at the higher price.
II. All consumers will lose surplus because they will have to pay a higher price of $28 instead of the original equilibrium price of $20.
III. Total surplus is likely to decrease because the increase in producer surplus will not be sufficient to offset the decrease in consumer surplus, given that the increase in price is substantial.

Assume the Market Depicted in the Graph Is in Equilibrium