Exporting to PDF higher than Acrobat 4 (PDF 1.3) makes files huge

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Can someone explain what's going on with compression in Indesign/Acrobat engine?

Normal A4 page ad, with PSD file as background. 

When i try to make a preview PDF, no matter what compression i set in "Export As PDF" Compression section, even with 72 dpi downsampling (72, for images above 72) and Image Quality Minimum i get 11 MB file. With PDF 1.4-1.7 standard.

But, with exactly the same settings (or even 150 dpi and Maximum image quality) and Acrobat 4 (PDF 1.3) file size is less than 1 MB.

[Abambo]

The solution lies in your PSD file. If your PSD file contains transparency, PDF 1.4 and higher can use that to produce higher quality PDF documents. PDF 1.3 and lower needs to flatten transparency, which in your case, as the PSD-file is the background file, does not make much of a difference. If you put a full non-transparent background in your PSD file (white background as an example), the PDF file size may change.

Without seeing your data, all the rest is speculation.