Figure 7-14

-Refer to Figure 7-14.If total surplus is $750 and consumer surplus is
A) $500, then the price of the good is $200.
B) $450, then the price of the good is $200.
C) $600, then the price of the good is $175.
D) $500, then the price of the good is $175.

Question

Figure 7-14
 
-Refer to Figure 7-14.If total surplus is $750 and consumer surplus is
A) $500, then the price of the good is $200. 
B) $450, then the price of the good is $200. 
C) $600, then the price of the good is $175. 
D) $500, then the price of the good is $175.

Quizplus · Accepted Answer

Total surplus is the combination of consumer surplus and producer surplus. In this diagram, consumer surplus is the area above the price line and below the demand curve. If consumer surplus is $600, then producer surplus is $150 ($750 - $600). Producer surplus is the area below the price line and above the supply curve. Using the formula for equilibrium price (where supply equals demand), we can find that the price is $175 ($150/0.857). Therefore, the answer is choice C.

Figure 7-14 -Refer to Figure 7-14.If Total Surplus Is $750 and Consumer