Question

Suppose a market is initially in equilibrium and demand decreases. The producer surplus will:_____.

a. be higher since the price is lower and equilibrium moves down along the supply curve.
b. be higher since the price is lower and equilibrium moves up along the supply curve.
c. be lower since the price is lower and equilibrium moves down along the supply curve.
d. be lower since the price is lower and equilibrium moves up along the supply curve.

Answer 1

c. be lower since the price is lower and equilibrium moves down along the supply curve.