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) $1,920.
B) $2,240.
C) $2,860.
D) $3,980.

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) $1,920. 
B) $2,240. 
C) $2,860. 
D) $3,980.

Quizplus · Accepted Answer

Total surplus is the sum of consumer surplus and producer surplus. Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. Producer surplus is the difference between the price producers receive for a good and the price they are willing to accept. At the market equilibrium, the quantity of the good that is produced is equal to the quantity of the good that is demanded. This means that the price of the good is equal to the marginal cost of production. The total surplus at the market equilibrium is equal to the area of the triangle below the demand curve and above the supply curve. This area is equal to $1,920.

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