Question

* Question Completion Status: 1 Price 110 + 8 Supply 8 8 +- 8 Demand 8 40+ S89 + + - 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 Quantity Refer to Figure 7-22. At the equilibrium price, total surplus is a. $3,500 b. $7,000. c. $2,500. d. $1,000

Answer 1

Answer

1.
The correct answer is "option a"
a. $3,500

Consumer surplus is the area under the demand curve and above the price.
Consumer Surplus=Area of triangle=0.5*base*height
base=equilibrium quantity=100
height=Price when demand is zero-Equilibrium Price=90-70=20
Consumer Surplus=0.5*(100)*(20)=1000

Producer Surplus is the area above the supply curve and below the price.
Producer Surplus=Area of triangle=0.5*base*height
base=equilibrium quantity=100
height=Equilibrium Price-Price when supply is zero=70-20=50
Producer Surplus=0.5*(100)*(50)=2500

Total Surplus=Consumer surplus + Producer Surplus=1000+2500=3500

2.
The correct answer is "option b"
b. $100

Consumer surplus is the area under the demand curve and above the price.
Consumer Surplus=Area of triangle=0.5*base*height
base=equilibrium quantity=10
height=Price when demand is zero-Equilibrium Price=65-45=20
Consumer Surplus=0.5*(10)*(20)=100