Table 7-16
-Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is
A)$18 lower than it would be if the equilibrium number of units were bought and sold.
B)$22 lower than it would be if the equilibrium number of units were bought and sold.
C)$26 lower than it would be if the equilibrium number of units were bought and sold.
D)$6 higher than it would be if the equilibrium number of units were bought and sold.

Question

Table 7-16 
-Refer to Table 7-16. Both the demand curve and the supply curve are straight lines. If 6 units are bought and sold, then total surplus is
A)$18 lower than it would be if the equilibrium number of units were bought and sold. 
B)$22 lower than it would be if the equilibrium number of units were bought and sold. 
C)$26 lower than it would be if the equilibrium number of units were bought and sold. 
D)$6 higher than it would be if the equilibrium number of units were bought and sold.

Quizplus · Accepted Answer

To find the total surplus, we need to find the area of the triangle above the supply curve and below the demand curve. The equilibrium quantity is where the two curves intersect, which is at a quantity of 8.

If 6 units are bought and sold, the price would be $8 (from the supply curve) and the quantity demanded would be 12 - 6 = 6 (from the demand curve). Thus, the total surplus would be:

$8 x 6 / 2 = $24

If the equilibrium quantity of 8 units were bought and sold, the price would be $6 (from the supply curve) and the quantity demanded would be 12 - 8 = 4 (from the demand curve). Thus, the total surplus would be:

$6 x 4 / 2 = $12

The difference between the two total surplus values is:

$24 - $12 = $12

Therefore, the total surplus is $12 lower than it would be if the equilibrium number of units were bought and sold. This corresponds to choice A.

Table 7-16 -Refer to Table 7-16. Both the Demand Curve and the Curve