Reference: Ref 8-11 (Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated to buyers randomly, what is the total consumer surplus in this market?
A) $90
B) $120
C) $30
D) $150

Question

Reference: Ref 8-11 (Figure: Price Ceilings and Consumer Valuation) Refer to the figure. Suppose a price ceiling of $3 goes into effect. If the goods sold are allocated to buyers randomly, what is the total consumer surplus in this market?
A) $90 
B) $120 
C) $30 
D) $150

Quizplus · Accepted Answer

To calculate consumer surplus, we need to find the area beneath the demand curve and above the price paid. With a price ceiling of $3, the quantity demanded is 30, as shown by the intersection of the price ceiling line and the demand curve. At this quantity, the price paid is also $3. Therefore, the consumer surplus is the area of the triangle with base 30 and height 6, which is (30*6)/2 = $90.