Judy is planning to sell an antique grandfather clock that she values at $200. If she sells the clock on Craigslist, it will be bought by someone who values it at $450. If she uses an antique dealer to sell the clock, it will be bought by someone who values it at $850. The antique dealer will charge Judy $100 to sell the clock, which just covers the antique dealer's opportunity cost of selling the clock. Relative to selling the clock on Craigslist, selling the clock through an antique dealer will lead:
A)to no change in total economic surplus.
B)total economic surplus to decrease by $100.
C)total economic surplus to increase by $400.
D)total economic surplus to increase by $300.

Question

Quizplus · Accepted Answer

If Judy sells the clock on Craigslist, total economic surplus will be $250 (= $450 - $200). If Judy sells the clock through an antique dealer, total economic surplus will be $550 (= $850 - $200 - $100). Thus, relative to selling the clock on Craigslist, selling the clock through an antique dealer increases economic surplus by $300. (=$550 - $250).

Judy Is Planning to Sell an Antique Grandfather Clock That