Asked by Abena Opoku on May 21, 2024
Verified
Refer to Figure 7-6. Area A represents
A) producer surplus to new producers entering the market as the result of an increase in price from P1 to P2.
B) the increase in consumer surplus that results from an upward-sloping supply curve.
C) the increase in total surplus when sellers are willing and able to increase supply from Q1 to Q2.
D) the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.
Producer Surplus
The difference between the amount producers are willing to accept for a good or service and the actual amount they receive due to market price.
Supply Curve
A graphical representation showing the relationship between the price of a good and the quantity of that good that suppliers are willing to sell in the market.
- Investigate the effect of variations in supply and demand on the economic advantage gained by producers and consumers.
- Demystify the link between the financial value of commodities and the surplus inventory.
Verified Answer
SL
Sophie LafondMay 26, 2024
Final Answer :
D
Explanation :
Area A represents the increase in producer surplus to those producers already in the market when the price increases. This is because producer surplus is the area above the supply curve but below the price level, and an increase in price expands this area for existing producers.
Learning Objectives
- Investigate the effect of variations in supply and demand on the economic advantage gained by producers and consumers.
- Demystify the link between the financial value of commodities and the surplus inventory.