Graph 7-3 -According to Graph 7-3, when the price falls from P₂ to P₁, producer surplus: A) decreases by an amount equal to A B) decreases by an amount equal to A + C C) decreases by an amount equal to A + B D) increases by an amount equal to A + B

Question

Quizplus · Accepted Answer

Producer surplus is the area above the supply curve and below the price. The decrease in price from P₂ to P₁ is represented by the vertical distance between these two points. This decrease results in a decrease in producer surplus that is equal to the area (A + B). Therefore, the best choice is C.

Graph 7-3 -According to Graph 7-3, When the Price Falls from P2

Graph 7-3 -According to Graph 7-3, When the Price Falls from P₂