Demand Shift Reduces Producer Surplus

Steps:

• Identify original equilibrium M as intersection of supply curve S and demand D1, with price at point J and quantity at N.
• Note leftward demand shift to D2, creating new equilibrium at lower price H and quantity R.
• Calculate producer surplus as area below price and above supply curve up to quantity supplied.
• New producer surplus is triangle from supply curve origin to H and R, labeled JHN.

Why C is correct:

• JHN is the triangle above supply curve S, below new price H, and up to new quantity R, matching producer surplus definition.

Why the others are wrong:

• A: GMNH includes deadweight loss area, exceeding new surplus.
• B: JGM is original surplus portion, ignoring demand shift.
• D: JNR adds quantity beyond new equilibrium, overstating surplus.

Final answer: C