The diagram below shows supply, demand, and quantity exchanged of Monday matinee movie tickets. Assume it is a perfectly competitive market. FIGURE 12- 4
-Refer to Figure 12- 4. What is the total economic surplus generated in this market at the allocatively efficient level of output?
A) $500
B) $125
C) $250
D) $5
E) $10

Question

The diagram below shows supply, demand, and quantity exchanged of Monday matinee movie tickets. Assume it is a perfectly competitive market.  FIGURE 12- 4
-Refer to Figure 12- 4. What is the total economic surplus generated in this market at the allocatively efficient level of output?
A) $500 
B) $125 
C) $250 
D) $5 
E) $10

Quizplus · Accepted Answer

The allocatively efficient level of output is where the demand curve intersects the supply curve, which is at a price of $5 and a quantity of 50. At this point, consumer surplus is $375 ($12.50 x 50 - $5 x 50) and producer surplus is $125 ($5 x 50 - $2.50 x 50). Therefore, the total economic surplus is $500 ($375 + $125).

The Diagram Below Shows Supply, Demand, and Quantity Exchanged of Monday