Figure 7-4

-Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?

Question

Figure 7-4
 
-Refer to Figure 7-4.Which area represents the increase in producer surplus when the price rises from P₁ to P₂ due to new producers entering the market?

Quizplus · Accepted Answer

The increase in producer surplus is the area above the supply curve and below the price level. In this case, the increase in price from P₁ to P₂ leads to new producers entering the market, which results in an increase in the quantity supplied. This increase in quantity supplied is represented by the horizontal distance between points A and D. The increase in producer surplus is therefore represented by the area between the supply curve and the vertical line drawn through point D, which is area CDEF.

Figure 7-4 -Refer to Figure 7-4.Which Area Represents the Increase in Producer