Suppose a market has only one seller and only one buyer of a good.The buyer has a reservation value of $25 and the seller has a reservation value of $15.The market price of the good is determined to be $20.If they trade,the social surplus will be ________.
A) $10
B) $20
C) $40
D) $60

Question

Quizplus · Accepted Answer

The social surplus is the sum of the buyer's and seller's surplus. The buyer's surplus is the difference between their reservation value ($25) and the market price ($20), which is $5. The seller's surplus is the difference between the market price ($20) and their reservation value ($15), which is $5. Adding these together, the social surplus is $10.

Suppose a Market Has Only One Seller and Only One