Figure 7-11
-Refer to Figure 7-11.If the supply curve is S and the demand curve shifts from D to D',what is the change in producer surplus?
A)Producer surplus increases by $3,125.
B)Producer surplus increases by $5,625.
C)Producer surplus decreases by $3,125.
D)Producer surplus decreases by $5,625.

Question

Figure 7-11 
-Refer to Figure 7-11.If the supply curve is S and the demand curve shifts from D to D',what is the change in producer surplus?
A)Producer surplus increases by $3,125. 
B)Producer surplus increases by $5,625. 
C)Producer surplus decreases by $3,125. 
D)Producer surplus decreases by $5,625.

Quizplus · Accepted Answer

With the shift in demand from D to D', the equilibrium price increases from $12.50 to $15.50. At this new price, the quantity supplied increases from 25 to 30. The area between the supply curve S and the new equilibrium price of $15.50 gives the new producer surplus, which is equal to ($15.50 - $10) x (30 - 10) / 2 = $3,125. Therefore, the change in producer surplus is an increase of $3,125.

Figure 7-11 -Refer to Figure 7-11.If the Supply Curve Is S and Is