Question

Given: Р P5 Some) Px P3 P 1:0 B -Dd Pit MR Q and assuming that all lines in the diagram are straight lines and that the following approximate measurements were made: O to P1 $10 o to Q1 20 million P1 to P2 $15 Q1 to Q2 10 million P2 to P3 $7 Q2 to Q3 10 million P3 to P4 $8 P4 to P5 $20 Please refer to the image and measurements above: i. A is called: ; Its value is $ ii. B is called: ; Its Value is $ iii. C is called: ; Its Value is $ iv. A+B is also known as

Answer 1

Answer

i. A is called: Consumer Surplus ; Its value is $ 300,000,000 Producer Surplus ii. B is called: 675,000,000 ; Its Value is $ Dead weight loss iii. C is called: ; Its Value is $ 75,000,000 iv. A+B is also known as Economic Surplus

Consumer surplus = 0.5(30)*(20)= $300 million

Producer surplus =[(15+30)/2]*(30)= 675 million

Dead weight loss = 0.5(15)(10) = 75 million

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