(Solved): A perfectly competitive market is shown in the graph on the right. The equilibrium price and quanti ...

A perfectly competitive market is shown in the graph on the right. The equilibrium price and quantity are \( \$ 6 \) and 4 units, respectively. The government institutes a price support program that works as follows. The support price is set at \( \$ 7 . \) At this price producers supply 5 units of the product. Rather than buy the excess supply, the government lets the market price fall to \( \$ 4 \), at which point consumers purchase the entire amount supplied The govemment pays suppliers the difference between the market price of \( \$ 4 \) and the support price of \( \$ 7 \) for each unit of the product produced and sold. As a result of this support program, consumer surplus (CS) and producer surplus (PS) both change as follows: CS and PS both increase. The increase in consumer surplus due to the support program is area The increase in producer surplus due to the support program is area Government spending on the support program is area \( A+B+C+D+E+F^{V} \) The deadweight loss due to the support program is area \[ \begin{array}{l} D+E+F \\ A+C \end{array} \]