Refer to the provided graph of a competitive market. If the output level is Q1, then the sum of the consumer and producer surplus is
A) bce.
B) ac0.
C) 0abe.
D) 0eQ1.

Question

Refer to the provided graph of a competitive market. If the output level is Q1, then the sum of the consumer and producer surplus is
A) bce. 
B) ac0. 
C) 0abe. 
D) 0eQ1.

Quizplus · Accepted Answer

Consumer surplus is the area above the market price (PM) and below the demand curve (D) up to Q1. Producer surplus is the area below the market price and above the supply curve (S) up to Q1. Therefore, the sum of consumer and producer surplus is the area below the demand curve and above the supply curve up to Q1, which is triangle 0ab plus triangle eQ1. The answer is 0abe.

Refer to the Provided Graph of a Competitive Market