Figure 4-E -Refer to Figure 4-E.When the price rises from P₁ to P₂, producer surplus: A)increases by area A + B B)increases by area B C)increases by area A D)decreases by area A + B + C

Question

Quizplus · Accepted Answer

Producer surplus is the difference between the price and the cost of production for producers. When the price rises from P₁ to P₂, the producer surplus increases by the area between the new price line and the supply curve up to the quantity produced. This area is represented by A in Figure 4-E. Therefore, the correct answer is C) increases by area A.

Figure 4-E -Refer to Figure 4-E.When the Price Rises from P1 to from P1

Figure 4-E -Refer to Figure 4-E.When the Price Rises from P₁ to from P₁