Final answer:
The correct answer is C. lower; higher, as at a higher price level the consumer surplus is lower due to consumers paying more, and the producer surplus is higher as producers receive more for their goods.
Step-by-step explanation:
The question deals with how the price level affects consumer surplus and producer surplus. When the price increases, all else being equal, the consumer surplus tends to decrease because consumers are paying more for the goods than they previously would have, thereby reducing the difference between their willingness to pay and the market price. Conversely, as the price rises, the producer surplus generally increases because producers are receiving a higher payment for their goods than their minimum acceptable price, therefore increasing the gap between the market price and their production costs.
Hence, the correct answer to the question 'All else equal, the higher the price, the ________ the consumer surplus and the ________ the producer surplus.' would be C. lower; higher. This is because at a higher price, consumers are worse off (lower consumer surplus), while producers are better off (higher producer surplus).