Consumer and producer surplus
Look at the graph and select the correct area for the questions that follow.
Which area represents:
- Consumer surplus at price P.
- Producer surplus at price P.
- The loss of consumer surplus if price rises from P to A.
- The change in producer surplus if price rises to A.
- The economic welfare to society at price P.
- The net loss of economic welfare to society if a monopolist enters the market and raises the price from P to A.
Using the concepts of consumer and producer surplus evaluate the likely economic effect of a subsidy on school footwear producers.
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