Figure 7-24
-Refer to Figure 7-24.If 4 units of the good are produced and sold,then
A)producer surplus is greater than consumer surplus.
B)consumer surplus is $16.
C)total surplus is minimized.
D)total surplus is not maximized.

Question

Figure 7-24 
-Refer to Figure 7-24.If 4 units of the good are produced and sold,then
A)producer surplus is greater than consumer surplus. 
B)consumer surplus is $16. 
C)total surplus is minimized. 
D)total surplus is not maximized.

Quizplus · Accepted Answer

If 4 units of the good are produced and sold, the producer surplus would be the area above the supply curve and below the price and equal to ($8 - $2) x 4 = $24. The consumer surplus would be the area below the demand curve and above the price and equal to ($10 - $2) x 4 / 2 = $16. Total surplus would be the sum of the producer and consumer surplus, which is $40. However, this level of production may not be the one that maximizes total surplus, since we don't know the shape of the demand curve and the other potential levels of production. Therefore, choice D is the best answer.

Figure 7-24 -Refer to Figure 7-24.If 4 Units of the Good Are