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 value of the consumer surplus generated in this market at the allocatively efficient level of output?
A) $250
B) $0
C) $5
D) $125
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 value of the consumer surplus generated in this market at the allocatively efficient level of output?
A) $250 
B) $0 
C) $5 
D) $125 
E) $10

Quizplus · Accepted Answer

The allocatively efficient level of output is where the market demand curve intersects with the marginal cost curve. In this case, it is at a price of $5 per ticket and a quantity of 50 tickets. At this level of output, the consumer surplus is the area above the price line and below the demand curve, up to the quantity exchanged. This is a triangle with a height of $10 (the difference between the maximum price consumers are willing to pay of $15 and the market price of $5) and a base of 50 tickets. Therefore, consumer surplus is (1/2) x $10 x 50 = $250. So, the correct answer is D.

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