Figure 7-5

-Refer to Figure 7-5. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?
A)Producer surplus increases by $625.
B)Producer surplus increases by $1,875.
C)Producer surplus decreases by $625.
D)Producer surplus decreases by $1,875.

Question

Figure 7-5
 
-Refer to Figure 7-5. If the demand curve is D and the supply curve shifts from S' to S, what is the change in producer surplus?
A)Producer surplus increases by $625. 
B)Producer surplus increases by $1,875. 
C)Producer surplus decreases by $625. 
D)Producer surplus decreases by $1,875.

Quizplus · Accepted Answer

When the supply curve shifts from S' to S, the equilibrium price decreases, leading to an increase in the quantity demanded. The area representing producer surplus is the area above the supply curve and below the price level, up to the quantity sold. The shift from S' to S increases this area, indicating an increase in producer surplus. The specific monetary change in producer surplus can be calculated based on the details provided in the figure (which are not visible in this text format), but the correct interpretation of the shift indicates an increase in producer surplus, not a decrease.

Figure 7-5 -Refer to Figure 7-5. If the Demand Curve Is D