Exhibit 18-7

-Refer to Exhibit 18-7. At what price is the sum of consumer surplus and producer surplus maximized?

Question

​Exhibit 18-7
​ 
-Refer to Exhibit 18-7. At what price is the sum of consumer surplus and producer surplus maximized?

Quizplus · Accepted Answer

The sum of consumer surplus and producer surplus is maximized at the point of equilibrium where the quantity demanded equals the quantity supplied. This occurs at a price of $4, where consumer surplus is the area above the equilibrium price and below the demand curve, and producer surplus is the area below the equilibrium price and above the supply curve. At a price lower than $4, there is a shortage and producer surplus is reduced, while at a price higher than $4, there is a surplus and consumer surplus is reduced. Therefore, $4 is the price at which the sum of consumer and producer surplus is maximized.

​Exhibit 18-7 ​

Exhibit 18-7