Figure 10-11
-Refer to Figure 10-11. Taking only private value and private cost into account, total surplus at the market equilibrium amounts to
A)$3,850.
B)$4,320.
C)$4,980.
D)$5,530.

Question

Figure 10-11 
-Refer to Figure 10-11. Taking only private value and private cost into account, total surplus at the market equilibrium amounts to
A)$3,850. 
B)$4,320. 
C)$4,980. 
D)$5,530.

Quizplus · Accepted Answer

The market equilibrium point is where the supply curve intersects with the demand curve. Given the demand curve (D) and the private cost curve (PC), the equilibrium price is $70 and equilibrium quantity is 52 units of the good. 
At the equilibrium price:
- Buyers' total willingness to pay (WTP) = area of triangle ABD = 1/2 x 70 x 52 = $1,820
- Sellers' total cost (private value, PV) = area of triangle APC = 1/2 x 70 x 52 = $1,820
Total surplus = WTP - PV = $1,820 - $500 (given in the graph) x 52 = $4,320.

Figure 10-11 -Refer to Figure 10-11. Taking Only Private Value and Private