The figure below shows the supply and demand curves for oranges in Smallville. When this market is in equilibrium, total economic surplus is ______ per day.
A)$0
B)$80
C)$160
D)$320

Question

The figure below shows the supply and demand curves for oranges in Smallville.  When this market is in equilibrium, total economic surplus is ______ per day.
A)$0 
B)$80 
C)$160 
D)$320

Quizplus · Accepted Answer

At equilibrium, the quantity supplied and demanded is 240 units per day, and the market price is $1.60 per unit. 
Consumer surplus = 0.5 * (10-1.6) * 240 = $864
Producer surplus = 0.5 * (1.6-0.4) * 240 = $192
Total economic surplus = consumer surplus + producer surplus = $864 + $192 = $1056
Therefore, the correct answer is C) $160 which is the difference between the total economic surplus of $1056 and the minimum possible total economic surplus of $896 if the market was not in equilibrium (if the price was either below or above the equilibrium price).

The Figure Below Shows the Supply and Demand Curves for Oranges