-In the above figure, if the price is $1.25 per gallon of milk and 5 million gallons are produced and consumed, then the consumer surplus is ________ and the producer surplus is ________.
A) $3.125 million; $3.125 million
B) $12.5 million; $12.5 million
C) $6.25 million; $6.25 million
D) None of the above answers are correct.

Question

-In the above figure, if the price is $1.25 per gallon of milk and 5 million gallons are produced and consumed, then the consumer surplus is ________ and the producer surplus is ________.
A) $3.125 million; $3.125 million 
B) $12.5 million; $12.5 million 
C) $6.25 million; $6.25 million 
D) None of the above answers are correct.

Quizplus · Accepted Answer

The consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. In this case, consumers are willing to pay $2.50 per gallon of milk, but they are only paying $1.25 per gallon. Therefore, the consumer surplus is $1.25 per gallon. Since 5 million gallons are produced and consumed, the total consumer surplus is $1.25 x 5 million = $6.25 million.The producer surplus is the difference between the price producers receive for a good and the price they are willing to accept. In this case, producers are willing to accept $1.00 per gallon of milk, but they are receiving $1.25 per gallon. Therefore, the producer surplus is $0.25 per gallon. Since 5 million gallons are produced and consumed, the total producer surplus is $0.25 x 5 million = $1.25 million.

-In the Above Figure, If the Price Is $1