Table 7-17

-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be
A) $42.
B) $48.
C) $54.
D) $60.

Question

Table 7-17
 
-Refer to Table 7-17. Both the demand curve and the supply curve are straight lines. If the price is $4 but only 6 units are bought and sold, total surplus will be
A) $42. 
B) $48. 
C) $54. 
D) $60.

Quizplus · Accepted Answer

Using the table, we can calculate that at a price of $4, the quantity demanded and supplied will both be 6. This means that consumer surplus is (1/2)*(10-4)*6 = $36 and producer surplus is (1/2)*(4-2)*6 = $6. Therefore, the total surplus is $36 + $6 = $42. However, the question asks for total surplus at only 6 units bought and sold, not the total quantity demanded/supplied. At this quantity, there is a deadweight loss of (1/2)*(6-4)*(6-10) = $6. Therefore, the total surplus is $42 - $6 = $36. However, the question asks for the total surplus, not just the consumer surplus and producer surplus. At a price of $4 and a quantity of 6, the total revenue (or total expenditure) is $4*6 = $24. Therefore, there is also a government surplus (since the question does not specify a tax or subsidy) of $4*(6-6) = $0. Adding all three surpluses together, we get $36 + $0 + $18 = $54, so the correct answer is C.

Table 7-17 -Refer to Table 7-17. Both the Demand Curve and the Demand