Refer to the above graph. 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

Quizplus · Accepted Answer

Consumer surplus is the area above the price line and below the demand curve, which in this case is represented by the triangle 0ab. Producer surplus is the area below the price line and above the supply curve, represented here by the triangle bec. Adding these two triangles together results in the area 0abe, which is the sum of the consumer and producer surplus. Therefore, the correct answer is C.

Refer to the Above Graph