Refer to the above table. If the equilibrium price increases, then the:
A) Producer surplus will decrease
B) Consumer surplus will increase
C) Producer surplus will increase
D) Allocative efficiency will increase

Question

Refer to the above table. If the equilibrium price increases, then the:
A) Producer surplus will decrease 
B) Consumer surplus will increase 
C) Producer surplus will increase 
D) Allocative efficiency will increase

Quizplus · Accepted Answer

An increase in the equilibrium price will result in an increase in producer surplus as producers are able to sell their goods at a higher price. Consumer surplus will decrease as consumers are forced to pay a higher price for the same quantity of goods. Allocative efficiency refers to the optimal allocation of resources and cannot be determined solely based on a change in equilibrium price.

Refer to the Above Table