Refer to Figure 6.6.What area represents the compensation for an increase in the price of gasoline from $1.75 to $3.00 per gallon?
A) a + b + c + d + e
B) f + g + h
C) a + b + c
D) d + e

Question

Refer to Figure 6.6.What area represents the compensation for an increase in the price of gasoline from $1.75 to $3.00 per gallon? 
A) a + b + c + d + e 
B) f + g + h 
C) a + b + c 
D) d + e

Quizplus · Accepted Answer

Area a + b + c represents the original consumer surplus before the increase in price. When the price increases, the consumer surplus decreases and the compensation given to the consumers is the area a + b + c, which represents the loss in consumer surplus. Therefore, the correct choice is C.