Refer to the image below. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be
A) lower than P1.
B) P1.
C) between P1 and P2.
D) higher than P2.

Question

Refer to the image below. Suppose producer surplus is larger than C but smaller than A+B+C. The price of the good must be ​  ​
A) lower than P1. 
B) P1. 
C) between P1 and P2. 
D) higher than P2.

Quizplus · Accepted Answer

If producer surplus is larger than C but smaller than A+B+C, it means that the price of the good is able to cover the cost of production (represented by C) but not all of the available surplus (represented by A+B+C). This implies that the price is somewhere between the minimum supply price (represented by P1) and the equilibrium price (represented by P2). Therefore, the correct answer is C: between P1 and P2.

Refer to the Image Below