In the production of electricity with fixed-production technology,the socially efficient price is $2 and the socially efficient level of output is 400 units;the market equilibrium price is $1.50 and the market equilibrium quantity is 600 units.The total social gain from producing the socially efficient output rather than the private equilibrium output is:
A) $50
B) $200
C) $400
D) $600
E) There is not enough information to calculate it

Question

Quizplus · Accepted Answer

The total social gain is the difference between the consumer surplus and producer surplus at the socially efficient output and the market equilibrium output. At the socially efficient output, the consumer surplus is $400 and the producer surplus is $200. At the market equilibrium output, the consumer surplus is $300 and the producer surplus is $150. Therefore, the total social gain is $400 - $300 + $200 - $150 = $200.

In the Production of Electricity with Fixed-Production Technology,the Socially Efficient