Answered: The screenshot shows a graph market for…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The screenshot shows a graph market for movies at equilibrium:

A) Calculate Consumer, producer, and total surplus.

b) Suppose in response to public outcry the government imposed a price ceiling of $8 in this market. Explain the impact on the total surplus and market efficiency.

Price
Supply
28
26 +
24
22
20
18
16
14 +
12
10
8
6
Demand
10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 Buantity
4.
2.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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