-Refer to Exhibit 4-8.If the wheat market is in competitive equilibrium,the consumers' surplus will equal
A) area 1 + 2 + 3
B) area 1 + 2 + 4
C) area 3 + 5
D) area 1 + 2 + 3 + 4 + 5
E) area 6

Question

-Refer to Exhibit 4-8.If the wheat market is in competitive equilibrium,the consumers' surplus will equal
A) area 1 + 2 + 3 
B) area 1 + 2 + 4 
C) area 3 + 5 
D) area 1 + 2 + 3 + 4 + 5 
E) area 6

Quizplus · Accepted Answer

In a competitive equilibrium, consumer surplus is the area above the market price and below the demand curve, up to the quantity traded. This includes areas 1 and 2, which are directly above the equilibrium price, and area 4, which is the triangle formed by the extension of the price line to the y-axis, representing the maximum price consumers are willing to pay minus the equilibrium price, for all units bought.