Figure 4-3 Figure 4-3 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 4-3.What area represents the deadweight loss at P2?

Question

Figure 4-3  Figure 4-3 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 4-3.What area represents the deadweight loss at P2?

Quizplus · Accepted Answer

The deadweight loss at P2 is represented by the area C+E which is the loss in consumer surplus (represented by C) and producer surplus (represented by E) due to the decrease in quantity from Q1 to Q2. Therefore, the best choice is C.

Figure 4-3 Figure 4-3 Shows the Market for Granola