Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 7, Problem 2P
(a)
To determine
The
(b)
To determine
The
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Consumer surplus is a measure of the difference between:
a) The price which a consumer has to pay and the cost of producing the good (in a diagram, the area between the market price, and the supply curve).
b) The consumer’s willingness to pay, and the cost of production (the area between the demand curve and the supply curve).
c) The value which a consumer places on a unit of the good, and the market price (the area between the demand curve and the market price line).
d) The marginal revenue from sales and the marginal cost of sales (the area between the marginal revenue and the marginal cost curves).
Suppose the demand & supply for the market for sweet potatoes is given by the following equations: Q_D=200-20 P & Q_S=30+30P where P is the price per lb. of sweet potatoes, Q_D is the quantity demanded for sweet potatoes and Q_S is the quantity supplied.
1.Calculate the consumer surplus at market price $4.00.
2.Calculate the producer surplus at price $4.00.
There are six potential consumers of computer games, each willing to buy only one game. Consumer 1 is willing to pay $40 for a computer game, consumer 2 is willing to pay $35, consumer 3 is willing to pay $30, consumer 4 is willing to pay $25, consumer 5 is willing to pay $20, and consumer 6 is willing to pay $15.
Suppose the market price is $29. What is the total consumer surplus?
The market price decreases to $19. What is the total consumer surplus now?
When the price falls from $29 to $19, how much does each consumer’s individual
consumer surplus change? How does total consumer surplus change?
Chapter 7 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- Suppose a consumer is willing to buy a book for $50, but the actual price of the book in the market is $30. What is the consumer surplus in this case? If the price of the book increases to $40, what would be the new consumer surplus?arrow_forwardThe market demand and supply equations for theme park in a city are given by P = 30 – 0.005QD and P = 10 + 0.005QS, where P is the price in dollars and QD is the quantity of theme-park tickets demanded and QS is the quantity of theme park ticket supplied. Given that the equilibrium price of theme park tickets is $20, equilibrium quantity of theme park tickets is 2000 and the consumer surplus is 10000 and producer surplus is 10000: Explain the implications of the welfare of consumers, producers and the society when the price of theme park ticket is fixed at $15. Support your answers with a graph of the theme park tickets market.arrow_forwardSuppose the demand for football tickets at a local college is QD=60,000−500P and the supply of tickets is QS=20,000. Part 2 The market equilibrium price is $8080 and the equilibrium quantity is 2000020000 tickets. (Enter your responses as whole numbers.) Part 3 Total economic surplus in this market is $enter your response here. (Enter your response as a whole number.)arrow_forward
- Refer to the figure below. What is the consumer surplus generated at a price of $150 per game console? Instructions: Use the tool provided “CS” to illustrate this area on the graph. Consumer surplus: $ ____ What is the producer surplus generated at a price of $150 per game console? Instructions: Use the tool provided “PS” to illustrate this area on the graph. Producer surplus: $ ____ e. What is total economic surplus at a price of $150 per game console? Economic surplus: $ _____ f. What is the economic surplus generated if the market were in equilibrium? Instructions: Use the tool provided “ESeq” to illustrate this area on the graph. Economic surplus in equilibrium: $ ______arrow_forwardYou are given the following market data for Venus automobiles in Saturnia. Demand: P = 35,000 - 0.50 Supply: P = 8,000+ 0.25Q where P = Price and Q = Quantity. a. b. C. Calculate the equilibrium price and quantity. Calculate the consumer surplus in this market. Calculate the producer surplus in this market.arrow_forwardThe demand curve for cookies is downward sloping. When the price of cookies is $3.00, the quantity demanded is 100. If the price falls to $2.00 what happens to consumer surplus?arrow_forward
- Regarding the conditions for the maximization of the total surplus, choose the correct words below. “The goods are produced by the producers with the (highest / lowest) costs. Raising or lowering the quantity of a good would not (decrease / increase) total surplus. The goods are consumed by the buyers who value them (least / most) highlyarrow_forwardUse the graph below to answer the following questions: a) what is the level of producer surplus if the market clearing price is $6? b) calculate the change in producer surplus if price increases from $6 to $8. c) what is the elasticity of supply in the $6-$8 price range?arrow_forwardWhich of the following is not a true statement about producer surplus? Select the correct answer below: Producer surplus is the benefit producers receive for selling goods in a market. On a graph, producer surplus is the area between the market price and the segment of the supply curve below the equilibrium. Producer surplus is the same as consumer surplus. Producer surplus is the difference between the amount that suppliers in the market are willing to supply goods for and the amount they actually receive for those goods.arrow_forward
- You are given the following market data for Venus automobiles in Saturnia. Demand: P = 35,000 - 0.5Q Supply: P = 8,000 + 0.25Q where P = Price and Q = Quantity. a. b. C. Calculate the equilibrium price and quantity. Calculate the consumer surplus in this market. Calculate the producer surplus in this market. Use the editor to format your answerarrow_forwardConsumer and Producer Surplus Work It Out: Question 2 of 3 The accompanying diagram shows the demand and supply curves for taxi rides in New York City. Uber's entry into the market reduces the quantity of rides demanded from taxis at every price. On the accompanying graph, shift the demand curve to accurately represent the change in demand. Then, move point E₁ to the new equilibrium point. The unlabeled point is to help you answer the next question and is not movable. Assume that New York City politicians respond by imposing a regulated price of $2.50 per mile. Calculate consumer surplus, producer surplus, and total surplus for the taxi market after Uber has entered the market. Consumer surplus: $ Producer surplus: $ Total surplus: $ million million million Price ($ per mile) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 1.83 1.30 Market for Taxi Rides in NYC 120 240.00 400.00 D 240 360 480 600 720 840 960 1,080 1,200 Quantity of taxi rides (millions of miles)arrow_forwardConsumer and Producer Surplus Work It Out: Question 2 of 3 The accompanying diagram shows the demand and supply curves for taxi rides in New York City. Uber's entry into the market reduces the quantity of rides demanded from taxis at every price. On the accompanying graph, shift the demand curve to accurately represent the change in demand. Then, move point E₁ to the new equilibrium point. The unlabeled point is to help you answer the next question and is not movable. Assume that New York City politicians respond by imposing a regulated price of $2.50 per mile. Calculate consumer surplus, producer surplus, and total surplus for the taxi market after Uber has entered the market. Consumer surplus: $ Producer surplus: $ Total surplus: $ million million million Price ($ per mile) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 2.50 1.30 Market for Taxi Rides in NYC E D 600.00 S 240.00 120 240 360 480 600 720 840 960 1,080 1,200 Quantity of taxi rides (millions of miles)arrow_forward
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