Figure 7-24
-Refer to Figure 7-24.At equilibrium,total surplus is
A)$36.
B)$54.
C)$18.
D)$108.

Question

Figure 7-24 
-Refer to Figure 7-24.At equilibrium,total surplus is
A)$36. 
B)$54. 
C)$18. 
D)$108.

Quizplus · Accepted Answer

Total surplus at equilibrium is the sum of consumer surplus and producer surplus. Consumer surplus is the area below the demand curve and above the equilibrium price, which is (6-3)*(6-2)/2=6. Producer surplus is the area below the equilibrium price and above the supply curve, which is (3-1)*(6-2)/2=4. Therefore, total surplus is 6+4=10. Since there are six units traded at the equilibrium price of $3, total surplus at equilibrium is 10*6=$60. However, there is a deadweight loss of 6/2*(3-1)=6, which reduces total surplus to $54.

Figure 7-24 -Refer to Figure 7-24.At Equilibrium,total Surplus Is