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Figure: Consumer and Producer Surplus
-(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer Surplus. If the price is held below equilibrium, producer surplus _____ and total surplus _____.
A) decreases; decreases
B) increases; stays the same
C) decreases; stays the same
D) increases; decreases

Question

Use the following to answer questions:
Figure: Consumer and Producer Surplus 
-(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer Surplus. If the price is held below equilibrium, producer surplus _____ and total surplus _____.
A) decreases; decreases 
B) increases; stays the same 
C) decreases; stays the same 
D) increases; decreases

Quizplus · Accepted Answer

When the price is held below equilibrium, producer surplus decreases because producers receive less for their goods than they would at equilibrium. Total surplus also decreases because the market is not operating efficiently, leading to a loss in total welfare.

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