Table 7-16
-Refer to Table 7-16. At a price of $2.00, total surplus is
A)larger than it would be at the equilibrium price.
B)smaller than it would be at the equilibrium price.
C)the same as it would be at the equilibrium price.
D)There is insufficient information to make this determination.

Question

Table 7-16 
-Refer to Table 7-16. At a price of $2.00, total surplus is
A)larger than it would be at the equilibrium price. 
B)smaller than it would be at the equilibrium price. 
C)the same as it would be at the equilibrium price. 
D)There is insufficient information to make this determination.

Quizplus · Accepted Answer

At a price of $2.00, quantity demanded is 1 and quantity supplied is 3, resulting in a surplus of 2. This means that there are only 1 unit of the good being demanded but there are 2 extra units being supplied, which will not be sold. As a result, total surplus will be smaller than it would be at the equilibrium price because there is inefficiency in the market.

Table 7-16 -Refer to Table 7-16. at a Price of $2.00, Total