Question

Quantity Refer to the diagram. Assuming equilibrium price Pl, producer surplus is represented by areas Multiple Choice O + 0 ab 0 a+c < Prev 39 of 50 !! Next >

Answer 1

As per rules and time constraint, only first question is allowed. Since the questions are small, I am answering first four questions. Kindly ask other questions separately. Thank you.

(Also, please provide all options)

1) In the figure,

a+b = consumer surplus

c+d = producer surplus

a+b+c+d = total surplus.

2) Producer surplus = difference between equilibrium price and willingness to accept/sell

More the willingness to sell price, less the producer surplus.

If equilibrium price increases, producer surplus will increase.

Like in first case÷

Producer surplus = $13 - $6 = $7

If equilibrium price were $14, then producer surplus = $14 - $6 = $8

Option a

3) Consumer surplus= willingness to pay - actual price paid (or equilibrium price)

Consumer surplus of Jena = $75 - $65 = $10

Consumer surplus of jane = $85 - $65 = $20

Total consumer surplus = consumer surplus of jena and jane = $20 + $10 = $30

Option b.

4) Positive externality is when there is external benefit. Here, the quantity is less than the optimal quantity. To internalise this externality, government gives subsidy. Subsidy increases the quantity.

Option c.