Asked by Bailey Rayoum on May 01, 2024
Verified
(Figure: Consumer Surplus III) In the figure Consumer Surplus III,total consumer surplus is _____ when the price is $10.
A) $50
B) $59
C) $124
D) $144
Consumer Surplus
The gap reflecting the difference between what consumers plan to pay for a good or service and what they pay in practice.
Surplus III
Excess of production or supply over demand in a market, leading to potential price reductions to clear the surplus stock.
- Acquire an understanding of the principle of consumer surplus and how it is shown graphically.
- Assess the consumer surplus at multiple price points with reference to a supply and demand diagram.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
C
Explanation :
At a price of $10, consumer surplus is the area between the demand curve and the price line up to the quantity demanded, which is (1/2)($14-$10)(10-2) = $24. Consumer surplus for each unit purchased will be different, but the total consumer surplus is the sum of the individual units. In this case, the eight units purchased result in a total consumer surplus of $24 x 8 = $192. However, since the quantity demanded is only six units at this price, the total consumer surplus is reduced to $24 x 6 = $144.
Learning Objectives
- Acquire an understanding of the principle of consumer surplus and how it is shown graphically.
- Assess the consumer surplus at multiple price points with reference to a supply and demand diagram.
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