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For good x could have increased decreased or remained

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Unformatted text preview: d, decreased or remained unchanged Solution: a) The supply of good X must have decreased and the demand for good X could have increased, decreased or remained unchanged The equilibrium could have shifted from A to B, C or D (see figure below). S2 Price C S1 B D A D3 D1 D2 Quantity Page 5 of 33 ©Prep101 www.prep101.com/freestuff Use the following graph for good A to answer question 7: Price I A B C Marginal Cost E F G H D Marginal Benefit Marginal Revenue Q1 Q2 Quantity of good A Q7. Assume initially Q2 units of good are produced. What will happen to the producer surplus if the production is reduced from Q2 to Q1 units? a) b) c) d) e) The producer surplus will increase by AEFB, but will decrease by FGH The producer surplus will decrease by FGH The producer surplus will increase by AEFB The producer surplus will decrease by EHG The producer surplus will decrease by EFG Solution: a) The producer surplus will increase by AEFB, but will decrease by FGH At Q2 units, PS= BGD. At Q1, PS = AEHD Gain of AEFB and loss of...
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