-In the figure above, when the market is in equilibrium, total consumer surplus on all the CDs bought will be
A) greater than $30 million.
B) less than at any other price.
C) $20 million.
D) less than $15 million.

Question

-In the figure above, when the market is in equilibrium, total consumer surplus on all the CDs bought will be
A) greater than $30 million. 
B) less than at any other price. 
C) $20 million. 
D) less than $15 million.

Quizplus · Accepted Answer

The equilibrium price is $15, and the equilibrium quantity is 2 million CDs. Consumer surplus is the area below the demand curve and above the equilibrium price. This area is a triangle with a base of 2 million CDs and a height of $5 (the difference between the equilibrium price and the price at which consumers are willing to buy 2 million CDs). The area of a triangle is (1/2) * base * height, so the consumer surplus is (1/2) * 2 million * $5 = $5 million.

-In the Figure Above, When the Market Is in Equilibrium