Question

Given the following diagrams: Q1 = 12 bags. Q2 = 7 bags. Q3 = 19 bags. The market equilibrium price is $46 per bag. The price at point a is $70 per bag. The price at point c is $10 per bag. The price at point d is $56 per bag. The price at point e is $31 per bag. The price at point f is $67 per bag. The price at point g is $32 per bag. Apply the formula for the area of a triangle (Area = ½ × Base × Height) to answer the following questions.

What is the dollar value of the total surplus (producer surplus plus consumer surplus) when the allocatively efficient output level Q1 is being produced?

Answer 1

$360

Step-by-step explanation:

The computation of dollar value of the total surplus is shown below:-

Consumer surplus = 1 ÷ 2 × (Point A price - Equilibrium price) × ( Q1 output level )

= 1 ÷ 2 × ($70 - $46) × 12

= $144

Now the producer surplus is

= Producer surplus = 1 ÷ 2 × (Equilibrium price - Point c price ) × Q1 Output level

= 1 ÷ 2 × ($46 - $10) × 12

= $216

Now Total surplus when output level Q1 is being produced is

As we know that

Total surplus = Consumer surplus + Product Surplus

= $144 + $216

= $360

Step-by-step explanation:

Answer 2

$360

Step-by-step explanation:

The computation of dollar value of the total surplus is shown below:-

Consumer surplus = 1 ÷ 2 × (Point A price - Equilibrium price) × ( Q1 output level )

= 1 ÷ 2 × ($70 - $46) × 12

= $144

Now the producer surplus is

= Producer surplus = 1 ÷ 2 × (Equilibrium price - Point c price ) × Q1 Output level

= 1 ÷ 2 × ($46 - $10) × 12

= $216

Now Total surplus when output level Q1 is being produced is

As we know that

Total surplus = Consumer surplus + Product Surplus

= $144 + $216

= $360