According to the graph shown, if the market goes from equilibrium to having its price set at $10:
A) area (C +
E) becomes deadweight loss.
B) area (
B) transfers from consumer surplus to producer surplus.
C) $12 of surplus transfers from consumers to producers.
D) All of these are correct.

Question

According to the graph shown, if the market goes from equilibrium to having its price set at $10:
A) area (C + 
E) becomes deadweight loss. 
B) area (
B) transfers from consumer surplus to producer surplus. 
C) $12 of surplus transfers from consumers to producers. 
D) All of these are correct.

Quizplus · Accepted Answer

If the market goes from equilibrium to having its price set at $10, both consumer surplus and producer surplus change. The new consumer surplus is represented by area (A) and the new producer surplus is represented by area (B + D). Deadweight loss is represented by area (C + E) as the quantity demanded decreases to Qd2 and the quantity supplied increases to Qs2, resulting in a decrease in total surplus. Additionally, area (B) transfers from consumer surplus to producer surplus as the price increases. The total surplus loss for consumers is $12, which equates to the difference in consumer surplus between Qd1 and Qd2. The total surplus gain for producers is also $12, which equates to the difference in producer surplus between Qs1 and Qs2. Therefore, all of the answer choices are correct.

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