Assume the market was in equilibrium in the graph shown. If the market price gets set to $7, which of the following is true?
A) Some producers gain surplus, but total surplus falls.
B) Some producers lose surplus, but total surplus rises.
C) Some consumers gain surplus, but total surplus falls.
D) Some consumers lose surplus, but total surplus rises.

Question

Assume the market was in equilibrium in the graph shown. If the market price gets set to $7, which of the following is true?
A) Some producers gain surplus, but total surplus falls. 
B) Some producers lose surplus, but total surplus rises. 
C) Some consumers gain surplus, but total surplus falls. 
D) Some consumers lose surplus, but total surplus rises.

Quizplus · Accepted Answer

If the market price gets set to $7, some consumers will gain surplus as they will now be able to purchase the good at a lower price. However, total surplus will fall because some consumers who were willing to pay a higher price will no longer be able to purchase the good, resulting in a reduction in overall economic welfare.

Assume the Market Was in Equilibrium in the Graph Shown