Figure 4-6 shows the market for granola.The market is initially in equilibrium at a price of P1 and a quantity of Q1.Now suppose producers decide to cut output to Q2 in order to raise the price to P2.
-Refer to Figure 4-6.What area represents consumer surplus at the equilibrium price of P1?

Question

Quizplus · Accepted Answer

Consumer surplus at the equilibrium price of P1 is represented by area A+B+C. This is because consumer surplus is the difference between the maximum price consumers are willing to pay and the market price they actually pay. Area A represents the amount that consumers are willing to pay for the quantity Q1 but actually pay less, resulting in consumer surplus. Area B represents additional consumer surplus for the quantity beyond Q1, and area C represents the consumer surplus for the small quantity between Q2 and Q1 after the price increase. Therefore, the correct answer is B, which includes all three areas.

Figure 4-6 Shows the Market for Granola