Scenario: Suppose a competitive market has ten buyers and ten sellers. The product exchanged in this market is beach hats, which are indivisible. The following table shows the reservation values for both buyers and sellers.

-Refer to the scenario above.Suppose the equilibrium price in this market is $10.What is the amount of social surplus in this market?
A) $44
B) $30
C) $15
D) $39

Question

Scenario: Suppose a competitive market has ten buyers and ten sellers. The product exchanged in this market is beach hats, which are indivisible. The following table shows the reservation values for both buyers and sellers.
 
-Refer to the scenario above.Suppose the equilibrium price in this market is $10.What is the amount of social surplus in this market?
A) $44 
B) $30 
C) $15 
D) $39

Quizplus · Accepted Answer

Social surplus is the sum of consumer surplus and producer surplus. In this case, consumer surplus is the area below the demand curve and above the equilibrium price, which is a triangle with a base of 4 and a height of 5, so its area is (1/2) * 4 * 5 = $10. Producer surplus is the area above the supply curve and below the equilibrium price, which is also a triangle with a base of 4 and a height of 5, so its area is (1/2) * 4 * 5 = $10. Therefore, the total social surplus is $10 + $10 = $20.

Scenario: Suppose a Competitive Market Has Ten Buyers and Ten