The graph below represents the market for lychee nuts. The equilibrium price is $7.00 per bushel, but the market price is $5.00 per bushel. Identify the areas representing consumer surplus, producer surplus, and deadweight loss at the equilibrium price
of $7.00 and at the market price of $5.00.
What will be an ideal response?
At the equilibrium price of $7.00:
Consumer surplus is represented by area A + B.
Producer surplus is represented by area C + D + E.
There is no deadweight loss.
At the market price of $5.00:
Consumer surplus is represented by area A + C.
Producer surplus is represented by area E.
Deadweight loss is represented by area B + D.
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