Figure 4-E -Refer to Figure 4-E.When the price falls from P₂ to P₁, producer surplus: A)increases by area B B)increases by area A + B C)decreases by area A D)decreases by area A + B

Question

Quizplus · Accepted Answer

When the price falls from P₂ to P₁, the producer surplus decreases by area A, which represents the difference between the old and new producer surplus at the original equilibrium quantity (Q1). The area B, which represents the new producer surplus at the new equilibrium quantity (Q2), is not relevant to the change in producer surplus caused by the price reduction.

Figure 4-E -Refer to Figure 4-E.When the Price Falls from P2 to from P2

Figure 4-E -Refer to Figure 4-E.When the Price Falls from P₂ to from P₂