Question

Use the graph below to answer questions 6 and 7. Price S100 Supply - MC $50 6. The 0 100 200 Quantity The minimum price this seller will accept for the 100 unit of output is: SO S50 S100 impossible to determine from the graph. b Producer surplus increases from a $50, S100 b. $5,000 $10,000 to when the price increases from $50 to $100 C $2,500 $10,000 $2.500 $20,000 The difference between the highest price a consumer will pay and the actual market price is called _ the difference between the actual market price and the lowest price a seller will accept is called a marginal benefit; marginal cost b marginal cost; marginal benefit producer surplus consumer surplus consumer surplus, producer surplus If Betty is willing to pay $45 for a new purse but only has to pay $30 for the purse, Betty will enjoy consumer surplus if she purchases the purse. b will experience a decline in consumer satisfaction if she purchases the purse cannot afford to purchase the purse. d must have a demand curve that is horizontal at a price of $45. Assuming demand is downward-sloping and everything else remains the same, an increase in the supply of a product leads to: an increase in consumer surplus. b. a decrease in consumer surplus. c. no change in consumer surplus. d. no change in producer surplus.

from question no 6 to 10

Answer 1

6) C, He will accept price at which MR = MC. Thus, he would like to have at least $100 ( which is nothing but the cost he is incurring for 100th unit.

7) C, producer surplus increase from 2500 to 10000. It is the area of the triangle. (1/2) * Height * Base.

8) D, Consumer surplus and Producer surplus.

9) A, she will enjoy consumer surplus of $15 per unit of purchase of purse. This is the difference between what she is willing to pay ($45) and what she has to pay ($30).

10) A, an increase in supply will result in an increase in consumer surplus. Since, keeping the demand constant, an increase in supply will reduce the equilibrium price and increase the equilibrium quantity purchased by the consumer. This will increase the consumer surplus area.