(Figure: The Market for Hero Sandwiches) Consider the figure The Market for Hero Sandwiches. At the competitive price of $5, 10 hero sandwiches are sold. At this price, consumer surplus equals _____, and producer surplus equals _____.

Question

Quizplus · Accepted Answer

At a price of $5, the quantity demanded is 15 and the quantity supplied is 10, which creates a shortage of 5 sandwiches. Consumer surplus can be calculated as the area of the triangle above the price line and below the demand curve, which is (0.5)(5)(15-5) = $50. Producer surplus can be calculated as the area of the triangle below the price line and above the supply curve, which is (0.5)(5)(5) = $12.50. Therefore, the total surplus in the market is $62.50, with $50 going to consumers and $12.50 going to producers.

(Figure: the Market for Hero Sandwiches) Consider the Figure the Market