According to the graph shown,if the market goes from equilibrium to having its price set at $10 then:
A) area (C +
E) is deadweight loss.
B) area B is transferred surplus from consumers to producers.
C) $12 of surplus gets transferred from consumers to producers.
D) All of these are true.

Question

According to the graph shown,if the market goes from equilibrium to having its price set at $10 then:
A) area (C + 
E) is deadweight loss. 
B) area B is transferred surplus from consumers to producers. 
C) $12 of surplus gets transferred from consumers to producers. 
D) All of these are true.

Quizplus · Accepted Answer

If the market goes from equilibrium to having its price set at $10, there will be a deadweight loss represented by area (C + E), as the quantity demanded will be lower than the quantity supplied. Moreover, there will be a transfer of surplus from consumers to producers, represented by area B, as producers will gain more surplus than consumers lose. Therefore, both options A and B are true. Finally, the amount of surplus transferred from consumers to producers can be estimated at $12, the difference between the consumer surplus at the initial equilibrium price ($22) and the consumer surplus at the new market price ($10), while the producer surplus increases by $12 as well. Therefore, option C is also true. Hence, the correct answer is D.

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