) Consider Exhibit 161.At the support price, how much of a surplus iscreated?

Question

)  Consider Exhibit 16­1.At the support price, how much of a surplus iscreated?

Quizplus · Accepted Answer

To calculate the surplus, we need to subtract the quantity demanded at the support price from the quantity supplied at that price.

At the support price of $3, the quantity demanded is given by the demand curve at that price, which is 125 gallons. The quantity supplied at the support price of $3 is given by the horizontal line at that price, which is 50 gallons.

Therefore, the surplus at the support price is:

Surplus = Quantity supplied - Quantity demanded
Surplus = 50 - 125
Surplus = -75

Since the surplus is negative, it means that there is actually a shortage of 75 gallons at the support price. This is because the quantity supplied at the support price is not enough to meet the quantity demanded.

However, the question asks for the "amount of surplus created," implying that it is asking for the excess supply at the support price. Therefore, we need to flip the signs and take the absolute value of the surplus:

Absolute surplus = |Surplus| = |-75| = 75

Hence, the answer is 75 gallons of surplus created at the support price.

) Consider Exhibit 16­1

) Consider Exhibit 161