Table 3.3
$\begin{array}{|l|c|}
\hline \text { Demand } & \text { Supply } \
\hline P=80-Q D & P=50+1 / 2 Q S \
\hline Q D=80-P & Q S=2 P-100\
\hline
\end{array}$
-Refer to Table 3.3.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of economic surplus in this market?
A)$300 thousand
B)$600 thousand
C)$1,200 thousand
D)$1,600 thousand

Question

Table 3.3
 $\begin{array}{|l|c|}
\hline \text { Demand } & \text { Supply } \
\hline P=80-Q D & P=50+1 / 2 Q S \
\hline Q D=80-P & Q S=2 P-100\
\hline
\end{array}$
-Refer to Table 3.3.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of economic surplus in this market?
A)$300 thousand
B)$600 thousand
C)$1,200 thousand
D)$1,600 thousand

Quizplus · Accepted Answer

The economic surplus is the sum of consumer surplus and producer surplus. Consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. Producer surplus is the difference between the price producers receive for a good and the price they are willing to accept. In this case, the equilibrium price is $60 and the equilibrium quantity is 20 thousand units. The demand curve is P = 80 - QD, so the consumer surplus is the area below the demand curve and above the equilibrium price, which is a triangle with a base of 20 and a height of 20. The area of a triangle is (1/2) * base * height, so the consumer surplus is (1/2) * 20 * 20 = $200 thousand. The supply curve is P = 50 + 1/2 QS, so the producer surplus is the area above the supply curve and below the equilibrium price, which is also a triangle with a base of 20 and a height of 10. The area of a triangle is (1/2) * base * height, so the producer surplus is (1/2) * 20 * 10 = $100 thousand. The economic surplus is the sum of consumer surplus and producer surplus, so the economic surplus in this market is $200 thousand + $100 thousand = $300 thousand.

Table 33 -Refer to Table 3