Answered: The diagram shows a subsidy on wheat…

The diagram shows a subsidy on wheat production given by the Canadian government to wheat producers. Which area represents the gain in consumer surplus? A: PLGB B: ACFP C:ACHK D: PFGB

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The diagram shows a subsidy on wheat production given by the Canadian government to wheat producers. Which area represents the gain in consumer surplus?

A: PLGB

B: ACFP

C:ACHK

D: PFGB

Consumer’s gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price and up to the equilibrium quantity. Consumer surplus is represented by area A.

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