The following figure illustrates the demand and supply curves for a good in a competitive market.

-Refer to the figure above.Suppose a price control of $7 is imposed on this market.Area(s)________ on the graph represent the consumer surplus,and area(s)________ represent the producer surplus in this market after this price policy.

Question

The following figure illustrates the demand and supply curves for a good in a competitive market.
 
-Refer to the figure above.Suppose a price control of $7 is imposed on this market.Area(s)________ on the graph represent the consumer surplus,and area(s)________ represent the producer surplus in this market after this price policy.

Quizplus · Accepted Answer

When a price control of $7 is imposed on the market, the new price will be $7 and the quantity exchanged will be determined by the intersection of the demand and supply curves at that price. In this case, the quantity exchanged will be 60.

Consumer surplus is the difference between the maximum price consumers are willing to pay and the actual price they pay. When the price is $7, consumer surplus is represented by area E.

Producer surplus is the difference between the minimum price that producers are willing to sell for and the actual price they receive. When the price is $7, producer surplus is represented by area A + B + H.

Therefore, the correct answer is B, where area E represents the consumer surplus and area A + B + H represents the producer surplus.

The Following Figure Illustrates the Demand and Supply Curves for a Good