Exhibit 7-10 Refer to Exhibit 7-10.The producer surplus before the subsidy is area

Question

Exhibit 7-10  Refer to Exhibit 7-10.The producer surplus before the subsidy is area

Quizplus · Accepted Answer

The producer surplus before the subsidy is represented by the area a+b. The subsidy increases the amount received by the producers, which is represented by the area e. However, this increase in producer surplus does not change the original area a+b, so the total producer surplus after the subsidy is a+b+e. Therefore, the correct answer is C, which represents the area of surplus that remains after accounting for the subsidy.