According to the graph shown, if the market goes from equilibrium to having its price set at $10 producer surplus will change:
A) from (F + G +
H) to (B + C + D + E + F + G +
H).
B) from (F + G +
H) to (B + C + F + G +
H).
C) from (F + G +
H) to (B + F +
H).
D) from (C +
G) to (B + C + F + G +

Question

According to the graph shown, if the market goes from equilibrium to having its price set at $10 producer surplus will change:
A) from (F + G + 
H) to (B + C + D + E + F + G + 
H). 
B) from (F + G + 
H) to (B + C + F + G + 
H). 
C) from (F + G + 
H) to (B + F + 
H). 
D) from (C + 
G) to (B + C + F + G +

Quizplus · Accepted Answer

When the market moves from equilibrium to a price of $10, the new quantity supplied will be greater than the quantity demanded, resulting in a surplus. This surplus will put downward pressure on the price until a new equilibrium is reached.

At the new price of $10, the quantity supplied will be greater than the quantity demanded, so producers will have to lower their prices in order to sell all their goods. This means that some of the area that was previously producer surplus will now be transferred to consumer surplus.

Option A is incorrect because it includes the entire original producer surplus (F + G + H) plus the entire new producer surplus (B + C + D + E + F + G + H). This implies that all of the original producer surplus is maintained, which is incorrect.

Option B is incorrect because it includes only a portion of the original surplus (F + G + H) and the entire new surplus (B + C + F + G + H). This does not account for the fact that some of the original surplus has been transferred to consumer surplus.

Option D is incorrect because it includes only a portion of the original surplus (C + G), which is too limited.

Option C is correct because it includes only the portions of the original surplus that remain after the transfer to consumer surplus (F + H) and the new surplus (B + H). This accurately reflects the fact that some of the original producer surplus has been transferred to consumer surplus.

According to the Graph Shown, If the Market Goes from Equilibrium